Why Is Car Insurance So Expensive?

The big reason car insurance has the cost it does has to do with how insurance companies gauge risk. There are a variety of statistical models built around the make and model of certain vehicles, the age and gender of the driver, the driving record associated with that driver, and who else could be driving the vehicle.

Beyond features like these, additionally, the level of coverage you get will play into recurring costs. Additionally, a higher deductible means a reduction in rates. If you buy the insurance in a lump sum for the year, rather than every month, that may also contribute to the price. Many insurance companies (like USAA) offer additional discounts for automated withdrawal.

Some companies (like Foremost Insurance) won’t allow a month-to-month insurance plan without automated withdrawal; otherwise, you have to simply pay upfront for either six months or a year. Depending on the sort of insurance you secure, this will be more or less expensive.

For example, an RV isn’t intended for continuous driving, so liability for a year may be under $300. Meanwhile, full coverage on the same vehicle will likely be something like $1,200. Of course, the type of RV, the age of the driver, their gender, and their record will play into how that price is calculated.

Driving Records Can Impact Insurance Rates

Somebody with an SR-22 on their insurance owing to a DUI (Or DWAI) will likely have to pay several times the normal amount for coverage. Thankfully, once the SR-22 is removed after the proscribed period, the price is once again reduced.

If you really want to understand why insurance has the cost it does, it’s important to pull back and examine the real way in which money is made with these groups. Customers insurance companies serve pay in on a monthly basis, or in an annual lump sum. Most who pay in won’t actually have to file a claim.

Accordingly, once operational costs are recouped, insurance companies tend to sit on a massive amount of resources. Different insurance companies use this money in different ways, but often what tends to happen is, they invest this money. That investment may be in real estate, stocks, or cryptocurrency; generally, it’ll be a “safe”, investment.

Essentially, many insurance companies (not all, but many) distribute their resources through the stock market. So their rates may be contingent on what the stock market is doing. If they lose out suddenly owing to a crash, that could result in a rate hike. It will depend on the insurance company.

Company Size May Not Indicate Expensive Or Cheap Options

Sometimes large companies have more expensive rates than smaller ones and vice versa. It’s important not to only take the cheapest possible option out there because such options tend to be spurious. Sometimes “cheap” insurance companies merely act as “shell” corporations for some collateral end, and no claims (or very few) are paid out.

The nature of insurance allows a lot of things to take place on the “back end” of commerce which isn’t necessarily in the best interests of those who have attained coverage. Granted, plenty of insurance companies are honest, straightforward, and deliver on their end as they are legally obligated to.

However, especially with large payouts and things like insurance fraud, there is a prerogative among insurance providers to use any technicality to avoid just settlements. Sometimes insurance plans are cleverly worded to allow providers a legal means of “ejecting”, as it were. Sometimes they shroud themselves in bureaucracy that takes a high-profile court case to pierce.

Insurance fraud is something insurance companies must protect themselves from even more than negligent drivers with records or economic fluctuation so that additionally drives up the price. And finally, because many laws nationwide require auto insurance (except for in two states), a lot of insurance groups know you need what they offer; so they have leverage.

Things You Can Do For The Best Deals

So what can you do about it? Well, for one thing, drive according to the law and keep as clean a record as you possibly can. For another, assure your vehicle’s maintenance and history is good.

You’ve heard of CarFax.com? Well, when insurance companies run your Vehicle Identification Number (VIN), its history pops up—this is mostly to assure the legality, but more information can be ascertained than just that.

So if you’ve got a cracked windshield, go to sites like Glass.Net and see if you can get that fixed. A settlement from an accident might cover replacement or repair, but it’s better to have a reliable vehicle beforehand.

Navigating A Complicated Situation

Once you pass the age of twenty-five, there will likely be a huge reduction in the cost of insurance. It will depend on your driving record, certainly; but provided you’ve got a relatively clean record at that time, you’ll see some reductions.

So to close out, insurance is expensive for many reasons. The age of the individual, their gender, their driving record, the vehicle they’re driving, the history of the vehicle, the state of the economy, the sort of insurance company involved, regional realities of the location where there is insurance, and unpredictable idiosyncratic factors of providers all come into play.

If you’re going to get the best deal, you need to shop around. Assure your vehicle’s history is good, your driving history is sound, and that you explore available options throughout your region for best results.

Conclusion

One of the main reasons for overly expensive insurance rates includes your driving record, your age, along with credit history, what car you drive, and where you live. Anything that insurers can link to an increased likelihood that you will be in an accident and file a claim will result in higher car insurance premiums. So before you buy a car (new or used), check insurance costs. Many insurers offer discounts for features that reduce the risk of injuries or theft.