Why Is Car Insurance So Expensive? (2024 Guide)

If the time has come to renew your auto insurance policy you may encounter sticker shock from seeing a higher premium. Which may lead you to wonder why car insurance is so expensive. This cost fluctuates due to industry factors, but it’s also influenced by information about the policyholder, the insured vehicle, and other variables.

In this article, we’ll examine what shapes car insurance rates and how you can get a better price. If you want to find cheaper car insurance, the best way to do so is to compare rates from some of the best car insurance companies. Use the tool below to get free quotes for low-cost auto insurance from top providers in your area.

The price you pay for coverage, known as a car insurance premium, can fluctuate for several reasons. An insurer will reassess your policy when it’s up for renewal and may give you a higher rate based on your driving habits, past claims, or an external factor–like an uptick in local crime.

Keep in mind it’s not always one single thing that can cause the price of a car insurance premium to shift. Below, we describe industry- and personal-related factors that can cause car insurance expenses to rise.

Industry Trends

If it seems like your car insurance premiums have been increasing, you’re probably not the only one who feels that way. The price of insurance coverage has statistically been going up nationwide for years.

Looking at historical data from the Insurance Information Institute, the cost of car insurance has gone up each year over the past decade except for in 2020 when insurers brought rates down during the COVID-19 pandemic. Between 2011 and 2020, rates rose by 32 percent overall.

Individual drivers can’t do much about these rising costs, which include annual inflation as well as things like how much the industry had to pay out in claims the previous year. If there are more claims filed than usual in a particular year, insurers will make up for it by charging higher prices in the future.

Did Insurance Increase After COVID?

Car insurance companies gave special rebates toward the start of the COVID-19 pandemic because people were driving infrequently and the rate of accidents went down. But the pandemic also led to a decreased supply of cars, parts, and higher labor costs for repair shops.

Insurance companies had to cover those costs when driving picked back up, so providers raised their rates to compensate. Our rate data shows that full-coverage insurance was an average of $1,730 per year in 2022 and in 2023 it rose to $1,968. That’s a 14 percent increase.

Geographic Increase In Claims

Your car insurance can also go up if there is an increase in claims in your local area. For example, a year with more severe weather events will do damage to vehicles and increase claims in the region. Even if your car wasn’t affected, the car insurance company may raise rates to compensate for the increase in claims.

Personal Factors

Personal factors have to do with your situation and are sometimes under your control. While you can’t change your age or driving history, you can work to improve your credit score or look into your payment options. These are all things an insurance provider will consider when determining an insurance rate. Providers look at data from your respective demographic to evaluate the overall risk of a customer.

Here are a few personal factors that may contribute to why your car insurance is so expensive:

• Gender: Men are statistically more likely to be in an accident than women, so they tend to pay more for coverage.
• Age: Young drivers under the age of 25 are likely to pay a high rate because they have less experience behind the wheel and are more prone to causing accidents.
• Marital status: Surprisingly, married couples in most states tend to pay less for coverage. Couples who have tied the knot usually file fewer insurance claims than drivers who are single, widowed, or divorced.
• How you pay: Insurance policies are generally sold in six- or twelve-month terms and customers can pay upfront or monthly. Many insurers give discounts for paying all at once, plus monthly payments could be subject to online fees, further increasing your bill.
• Where you live: The state you live in determines how much insurance coverage you’re required to purchase. Also, living in high-traffic areas and places with high crime rates can cause your insurance costs to go up.
• Credit score: Insurance providers in most states use credit history as a metric to see how likely a customer is to miss payments or file a claim. Having no or bad credit can lead to a higher annual premium.
• Type of car: Cars may be considered higher risk if they cost more to repair or are more likely to be stolen. You’ll also usually see a higher rate if you own a luxury car, as the insurer will have to pay out more money if it’s damaged.
• Your driving record: A bad driving record will cause your premium to rise. If you have past at-fault accidents, DUIs, or speeding tickets, your insurance cost will go up and is likely to stay high until these things fall off your record (typically three years).
• Your claims history: If you file a claim during your policy period, you will likely see a rate hike when you renew your policy.

Now that you know why car insurance is so expensive, here’s the good news: It doesn’t have to be. There are several ways to save money if your policy has become too expensive. Below, we’ve listed a few things you can do to get more affordable car insurance rates.

1. Drop Unnecessary Coverage

Dropping coverage you don’t need or don’t use is one way to pay less for car insurance. If you have full-coverage auto insurance on a car valued under $5,000, you can likely downgrade to just liability car insurance. You may also want to lower your policy limits, but if you do this, make sure you can afford to cover damages on your own after an accident.

2. Look For Bundles And Discounts

If you’re a student with good grades, have been accident-free for several years, or have anti-theft devices on your vehicle, you might qualify for a discount. Insurance providers offer policyholders rewards for being a good student, taking safe driver courses, having multiple vehicles, and more. Some also offer discounts on car insurance for veterans and government employees.

Bundling your auto insurance with different types of coverage such as homeowners or renters insurance might also lower rates on your overall price, as will having multiple family members on a policy. Younger drivers are great candidates for this, as a student might find a better rate by being on a parent’s policy. Ask an insurance agent what discounts you qualify for when it’s time to renew your auto insurance.

3. Opt For A Higher Deductible

Changing up your deductible is another way to a lower premium. Your deductible is the out-of-pocket expense you pay before your collision or comprehensive insurance pays out during the claims process. While a low deductible means you’ll pay less when you file a claim, raising your deductible can save you money if you have the financial means to cover unexpected bills. Keep in mind, you’ll also get a smaller payout on your vehicle if it’s totaled and you have a high car insurance deductible.

Comparing insurance providers is a great way to find the best rate on auto insurance coverage. Our team of insurance specialists have reviewed the country’s top insurers and found that USAA and Geico are two excellent options due to their competitive prices. Read on to learn more about them, or enter your zip code below to start comparing free quotes from providers in your area.

USAA: Best For Military Members

If you’re a veteran of the United States military or have a family member with an existing USAA account, USAA is a great choice for insurance coverage. Customers can save 15 percent on their policies if they have a military history, 10 percent for bundling policies, and additional savings for staying with the company for several years. 

You can learn more about the insurer’s coverage options in our USAA auto insurance review.

Geico: Best For Basic Coverage

With a famous slogan that claims it can save you 15 percent on car insurance, Geico is known for being able to offer great rates and great service. The Better Business Bureau (BBB) rates Geico an A+, and many customers have written rave reviews about the insurer online. With coverage available in all 50 states, discounts for safe driving and taking steps to protect your vehicle, plus add-ons like mechanical breakdown insurance, Geico is a great option for many drivers. 

Read our Geico auto insurance review to get more information.

Below are some frequently asked questions on why car insurance can be expensive.

Our review team extensively researches auto insurance providers to deliver informed and unbiased assessments of leading companies. We evaluate several key rating factors that are important to consumers to determine which providers are the best in the industry:

• Reliability: It’s important that an auto insurer is able to meet its claims obligations. Companies with a strong financial strength rating from AM Best score best in this category. Established insurers with a long history of reliable service also receive positive marks.
• Availability: Insurance companies that offer wider availability to consumers in terms of state availability and few eligibility requirements are more likely to meet consumer needs.
• Coverage: To determine our coverage score, we look at the number of coverage options available as well as coverage limits and deductible options. Our ratings also take into account additional services and benefits like roadside assistance.
• Pricing: Cost can be difficult to compare between insurers because so many factors impact annual premiums. The cheapest insurer for one driver may not be the cheapest for another. To determine our cost score, we look at insurance rate estimates generated by Quadrant Information Services, discount opportunities, and consumer reports.
• Service: We comb through customer reviews on sites like the Better Business Bureau (BBB) to learn about customer experiences. Insurers with a low volume of complaints score well in this area. We also consider the claims process, giving higher ratings to car insurance providers that offer a smooth experience.
• Technology: Providers with an online quote tool, easy-to-use claims app and a usage-based insurance app score best in this category.

*Data accurate at time of publication.