It seems like car insurance premiums keep going up and up.
And for good reason – they are.
According to AAA 2022 Your driving costs study, the average annual cost of full coverage for the average sedan is now $1,694. This is more than 20% more than in 2021.
While there is little you can do personally to curb inflation, you Can control where your own premiums fall compared to other drivers. At least to some extent.
The following are the main factors that can lead to high car insurance premiums. I have also included some tips on how to minimize your bets.
Reasons why your car insurance might be high
Dicey driving record
Insurance companies will want to know your full driving history before issuing you a policy. This includes any accidents you have had in the past, as well as traffic violations such as speeding tickets.
If you have had at least a couple of accidents – recent or otherwise – you will pay a higher premium. the same is true of traffic violations. If you score faster than LeBron James, you’re in trouble. LeBron is rewarded for scoring, but you are not.
Claim amounts arising from any accidents may also affect insurance premiums. Someone with a few minor wing failures is at far less risk than someone with a total of three cars.
That’s why it’s worth having the right insurance. Companies like Allstate offer accident insurance so your rate won’t automatically go up after an accident.
Read more: How much does your insurance increase after an accident? (And 6 ways to reduce it)
Expensive trips
Simply put, you (and therefore the insurance company) are at greater risk the farther you drive and the more often you are on the road.
If you have a long commute to work, this may not bother you, because you can just listen to podcasts to pass the time. The problem is that you pay a higher premium because of this.
Low credit score
It’s true, believe it or not, insurance companies want to see your credit history. This includes all of your debts, as well as any tax withholdings, personal judgments, and medical bills.
If you don’t have a credit history or your credit report isn’t perfect, you will pay more for car insurance. This doesn’t mean that insurance companies care about how much debt you have, but they do look for delinquency patterns, liens against you, or taxes you refused to pay.
Insurance companies seek to reduce their risk, and if you seem risky, they will make you pay for it.
Unreliable payment history
If you are regularly late with your insurance payments, your insurance company may raise your rate or cancel your insurance altogether.
And if your next potential insurer sees a gap in your insurance history, they will see you as a burden and punish you with a higher premium for it.
Risky regions
Different geographical areas have different accident rates, weather conditions and crime rates. These changes affect your bonuses.
For example, my parents’ insurance rates. doubled when they moved from Ohio to Florida. There are only certain parts of the country that charge a higher insurance premium.
Read more: Minimum auto insurance requirements by state
Gender, age and marital status
Once again, this is not this is actually something you can control, but insurance companies will look at the historical averages of accident rates across demographics and factor those results into your premium.
Men, for example, tend to pay higher insurance premiums than women. especially early in their driving career due to the higher average number of accidents and traffic violations. Insurance companies also believe that married drivers are safer than their single counterparts.
More sporty car
This is one thing that is within your control. Insurance companies will want to know if you’re driving a safe, boring car or a speedy hot rod that gets into a lot of accidents or gets stolen a lot.
It doesn’t matter how safe you feel in your car. If you choose a car that the insurance companies consider risky, you will pay for it. In many cases, smaller sports cars suffer from this.
In addition, there are rumors that a red car is more expensive in insurance. completely false. According to Esurance, “the year, make, model, body style, and age of your vehicle” matters when it comes to your premiums.
Coverage terms and franchise
The policy you end up choosing will be a huge determining factor in what you pay. Think of it like choosing a health insurance plan. If you choose a plan with all the bells and whistles (or, in the case of auto insurance, with the amount of coverage you choose), you will pay more.
Deductions are also an important factor. A deductible is something you pay out of your own pocket, for example, when you get into an accident.
If your policy has a low deductible (usually less than $1,000), your premiums will be much higher. While it may cost you less during an accident, you will pay more in your monthly or annual car insurance premium.
Finally, who you have on your policy can affect your rates. For example, if you have a teenager on your policy, they will be considered a “young operator” and your premiums will increase.
Read more: How much does safe driving cost? Types of auto insurance you need
How to reduce car insurance costs
Source: Shutterstock.com/ Arty Medvedev
If you’ve read this far, you now know exactly how your stakes are determined and why your current stake might be higher than you’d like.
You can reverse many of these factors by doing the opposite of what causes high levels. But to be sure, here are some more tips on how to reduce the premium:
Shop Providers
It is mine Recommendation number one: If you are paying too much for insurance, make it a habit to regularly look for more affordable insurance companies.
Some insurers do penalize those who take long commutes to work; others go into more detail about your driving history. You won’t know which provider really values your driving profile unless you get offers from multiple providers.
In addition, your life is changing rapidly. In a given year, you can change the zip code or get married, two adjustments that can affect your insurance premiums. In addition, both you and your car will inevitably grow old. This should lower your insurance premiums as older drivers tend to be more responsible and older vehicles are cheaper to replace in the event of a major accident.
With such a dynamic life, it’s a good idea to ask your current insurer to review your rates every six months. Then compare their offer with at least a few competing insurance companies.
Read more: The best auto insurers of 2022.
Compare cars
We hope that when looking for a new set of wheels, most of us are savvy enough to compare several different options that meet our basic driving needs and seriously consider the vehicle’s retail price when making our final decision.
But what many of us often forget to do is check how much it will cost. insure each of the cars we consider buying.
Let’s say you’ve narrowed your search down to two cars. Car A costs $20,000 and Car B costs $25,000. Your first impulse may be to choose a cheaper car, all other things being equal.
But with a little research, you may find that car A costs twice as much. As long as you have the car, you’ll be paying this high premium each month, and over time, it may well exceed whatever you saved on the retail price of the cheaper car.
Maximum discounts
Each insurance company has several discount programs – for example, military, student, good driver (no accidents and tickets) and much more. Check your insurance company’s website to find out what discounts they offer and if there are any that you are eligible for but haven’t taken advantage of yet.
Pay in advance
Some insurers offer lower rates for those who pay insurance premiums in a lump sum annually rather than in monthly installments.
If the temptation of reduced rates convinces you to switch to annual rather than monthly payments, be sure to check with your service provider about the following:
- Will they give you a prorated refund if you decide to cancel your policy in the middle of the term?
- Do they charge a cancellation fee?
Cheaper rates are good, but you don’t want to have your hands tied if you find a better deal from another insurance company.
Wrap up
Bundling where you buy more than one insurance policy from the same provider can save you a lot of money because the insurance provider now charges you two or more premiums instead of one.
Almost every insurance company will give you a discount if you bring your entire business to them. So if you pay different insurers for different types of police, call each of those insurance companies to find out what rate they will offer you if you team up. Then compare the total to what you pay for the status quo with different policies at different insurance companies.
Read more: The best home and car insurance packages
Drive safely and save
Safe driving is not only the right decision for your own safety and the safety of others. It’s also easier on your insurance premiums. Providers will reward better driving, fewer accidents and fewer claims.
Get a higher franchise
This is pretty much common sense, but if you raise your deductible, your insurance premiums will go down. If you have a good driving record, you probably don’t need a low deductible.
Save money every month by increasing your deductible as much as you want. And hey, a high deductible can also have a positive psychological impact on your driving.
Summary
It’s easy to see why auto insurance rates can be excessive. But now that you have the knowledge to identify where you’re missing out on potential savings, get off social media for the night and spend some time getting the rate you deserve!
