Why Is Auto Insurance So Expensive?
Auto insurance premiums are determined by a variety of factors. Some drivers have high risk factors, while others are considered “high risk” for their insurers. In this article, we’ll explain why bad credit drivers are subject to higher rates, while cars with higher safety ratings will attract lower premiums. You’ll also learn what factors affect the premium price of your auto insurance. And as always, don’t forget to shop around before you purchase your insurance.
Factors that affect premium price of auto insurance
Premium prices for auto insurance vary according to several factors, from the weather to crime rates. Some factors are beyond our control, but others reflect our decisions and actions. Let’s look at a few of them. While age may play a role in the premiums, it is not the only factor. For example, the crime rate in a particular region may be higher than the same area in another state. And, the cost of repairs to your car can also affect the premium.
The cost of a vehicle plays a big role in insurance premiums. For example, sports cars tend to cost more to insure than family cars. This is because sports cars are more expensive to repair and typically contain more safety features. Additionally, older vehicles will cost less to insure. Insurers look at several factors when determining premium prices, so it is important to understand which ones affect the costs of your car insurance.
Drivers with bad credit pay more for coverage
Most people with poor credit pay higher rates for auto insurance coverage. The good news is that there are several ways to reduce these costs. Bundling insurance policies like auto and homeowner’s insurance is a great way to reduce the cost of a single policy. Insurance companies also reward good drivers by reducing their rates. To improve your credit score, pay off any outstanding balances and try to improve your score. You can expect to save around 20% per year on your auto insurance premium by doing these things.
Some insurance companies specialize in insuring high risk drivers. This type of insurance is usually more expensive than the norm, but some companies cater to people with bad credit and offer policies that are affordable. Grange Insurance, for example, offers bad credit auto insurance that costs 27% more than a policy for drivers with good credit. Other high risk insurance companies, such as Safe Auto and Dairyland, offer a policy with low rates, but still charge higher annual premiums than the average driver.
Cars with higher safety ratings have lower rates
You’ve probably heard of the importance of safety ratings for cars and how they affect the cost of car insurance. Safety rating systems are used by insurance companies to determine the safety of cars and their features, such as airbags. Higher safety ratings mean fewer accidents and fewer claims, which translates into lower premiums. Auto insurance companies use hundreds of factors to calculate premiums. The higher the safety rating of a car, the lower its cost.
Insurance premiums also depend on your personal profile, such as your age, gender, credit score, and driving history. Having a clean record is rewarded with lower rates, but having a DUI or other blemish on your record can cost you a fortune. To get the lowest possible rates, shop around and compare quotes from several auto insurance companies. And remember: there is no one size fits all when it comes to insurance.
High-risk states have higher rates
There are several different reasons why high-risk drivers pay more for auto insurance. Many of these factors are caused by poor credit, age, prior traffic violations, and lapses in insurance coverage. Regardless of the reason, the overall result is the same: drivers with poor credit have higher auto insurance rates. Additionally, drivers with a DUI on their record have higher rates. DUI drivers have a higher risk profile and are more likely to file insurance claims.
The severity of a driver’s history of traffic violations and accidents can increase a person’s insurance premiums. A hit-and-run accident, for instance, can raise an insurance premium by up to 100%, while a not-at-fault accident increases rates by just 4%. Fortunately, this difference is negligible when compared to the average cost of car insurance for a thirty-year-old driver in the United States, which is $1,805 for full coverage.