Auto insurance is such an essential part of life that you never really question anything about it until you see how much it costs. All the years leading up to your first car never require you to think heavily about auto insurance. The only thing you know is that one day you’ll need it.
But when that day comes and you’re the one paying for it—instead of someone else footing the bill—you suddenly realize that auto insurance is incredibly expensive. Sometimes, you may even wonder if you really need auto insurance. Is it truly that necessary, or is it something you can bypass for a while and get away with it?
Well, the simple answer is that auto insurance is definitely useful and worth having if you own a motor vehicle. Many insurance companies charge big bucks to provide it simply because they know how beneficial it is for drivers. However, there are other valid reasons why car insurance can be pretty costly.
So, if you’re constantly asking yourself why is auto insurance so expensive, don’t worry. This article will give you the exact answers you’re looking for and explain how to find cheaper rates.
Types of auto insurance coverage
Before discussing why auto insurance is expensive, it’s important to understand the types of coverage that are available. Overall, there are six common types of car insurance coverage.
Depending on where you live, some of these coverages may be mandatory, regardless of how expensive they are for you. However, other coverages may be optional. The best thing to do is find out your state’s rules and guidelines regarding auto insurance. That way, you know what to pay for and what’s up for debate.
Keeping that in mind, here are six types of car insurance coverage that you may need or want to consider.
1. Liability Coverage
In most states, there’s one type of coverage that you usually need: liability coverage. Typically, your state will ask you to buy the minimum liability coverage required by its law.
Additionally, this coverage will contain two key components:
- Property damage liability: this component pays for any damages you cause to another person’s car or property while driving.
- Bodily injury liability: this aspect handles the costs for any injuries that another person has because of an accident you cause.
Of course, both these facets of liability coverage are extremely important. They cover the costs of two things—property and bodily damage—that typically occur during a car accident.
2. Uninsured and Underinsured Coverage
While auto insurance is vital and oftentimes required, not everyone has it. And if you get into an accident with someone who doesn’t have car insurance, it’ll be nice to have uninsured and underinsured coverage.
This type of insurance helps pay for any of your medical expenses that resulted from an accident. Also, in some states, this coverage pays for the repairs to your motor vehicle.
If you’re dealing with someone who has insurance, but they’re underinsured, meaning their liability limits can’t cover your medical bills, then uninsured and underinsured coverage can also help.
3. Comprehensive Coverage
Accidents aren’t the only unfortunate things that can happen to your car. Motor vehicles can also catch on fire or experience hail damage, and someone can steal or vandalize them. In these scenarios, comprehensive coverage is excellent.
It helps pay for repairs or the replacement of your motor vehicle. Additionally, this coverage includes a deductible, which is the total amount you’ll have to pay out of pocket before your insurer reimburses you for the claim.
4. Collision Coverage
Maybe you collide with another vehicle or hit an object, like a fence. When this happens, collision coverage can benefit you. It may help pay for the repair or replacement of your car.
5. Medical Payments Coverage
If you or anyone driving your insured motor vehicle gets injuries from an accident, medical payments coverage can help pay for the bills related to your bodily injuries. For example, the coverage might pay for your X-rays, surgery, or hospital visits.
6. Personal Injury Protection
This coverage is only available in some states. Personal injury protection is similar to medical payments coverage because it helps pay for the medical expenses that you incur from an accident. However, personal injury protection can also cover other costs that accumulate because of your injuries, such as lost income and childcare expenses.
The reasons auto insurance is so expensive
Regardless of the type of coverage you choose, there are five reasons why your auto insurance may be costly. Some of these reasons are inescapable, but others are up to your control. So, without further ado, here are the main reasons why auto insurance is so expensive.
1. Your credit history
One of the leading factors determining your auto insurance rate is your credit history. The Federal Trade Commission (FTC) suggests that drivers with poor credit scores file more claims than those with high credit scores, and they file them more frequently.
For car insurance companies, drivers with poor credit history come with more risks, leading to a higher rate. Research indicates that, on average, companies will increase insurance rates by 76% for drivers with poor credit scores, a price hike that’s around $1,180 annually.
2. Your driving record
If you’ve started raking in DUIs, at-fault accidents, and speeding tickets, you can bet that your auto insurance premium will be expensive. Insurance companies will up-charge you for three to five years after any claim or violation.
3. Your age
One thing you can’t control is your age. Auto insurance companies will use it to determine the best rate for your policy. Typically, drivers younger than 25 will pay more than drivers who are older.
In fact, a driver who’s 16 years old will have an average annual premium of $3,343, while a 25-year-old driver will have one that’s $862. This difference is usually attributed to the fact that younger drivers are perceived as having less driving experience than others.
4. Your location
While you can’t control your age, you can control your location. Auto insurance companies look at your zip code to help determine your rate. If you stay in an area with a higher claim frequency, your auto insurance may be more expensive than someone who lives in a different neighborhood. Additionally, because states regulate car insurance, legislation can impact your price.
5. Your insurance company
Your car insurance company will play a significant role in the rate that you receive. Depending on who you choose, your insurance will either be cost-effective or just costly. Some companies will also try to scam you, but others will simply be more expensive, regardless of your driving profile or credit history.
How to decrease your auto insurance rate
Moving to another state or zip code to get a better auto insurance rate isn’t always possible or even desirable. In the same vein, you can’t change your credit score overnight, and you can’t change your age even if you try to lie about it. That means it’s not easy to decrease your auto insurance fee, especially if your driving record isn’t pristine.
However, assuming you have a good record, you can reduce the cost of your auto insurance by looking for a quality and cost-effective insurer. For example, Barry Risk Management is a great option.
With over 30 years of experience, Barry Risk Management knows how to find ways to provide cheaper rates. And it doesn’t matter where you live. If you’re looking for excellent car insurance for a reasonable price, Barry Risk Management can help. All you have to do is get in touch, and a representative will take care of everything online.
Call 1-888-995-TAGS(8247) to speak with a representative about getting a good auto insurance rate!