Why is my car insurance so high?

The national average cost of full coverage car insurance climbed 15 percent from 2023 to 2024, leaving many drivers wondering why coverage has gotten so expensive. Most states require drivers to carry some level of car insurance, but the rate you pay is influenced by a variety of personal factors. Understanding the influences behind your rate increase can help you determine why your rate is climbing and how to save on your premium.

Why is my auto insurance premium so high?

Between 2023 and 2024, full coverage auto insurance rates rose by 15 percent, and the 2024 national average is $2,314.This may cause you to wonder if you have done something to personally impact your rate. Keep in mind that your demographics and driving behavior both can affect your insurance premiums — so will the type of vehicle you drive and your location. Every company uses a different system to weigh and calculate your risk as a driver, so your premiums will likely vary from one company to the next. Here are some of the factors that may play into the rate quotes you receive.

Car insurance company

Car insurance companies must file for permission to raise rates with the state agency overseeing insurance if they want to raise rates across the board for all policyholders. Many car insurance companies filed for rate increases in 2023. While average rates have risen in every state, the specific insurance company you purchase insurance from will determine how much you pay and how much you can save.

Each insurance company has its own underwriting system for calculating premiums. Although all insurance companies look at factors like vehicle type, driving history and location, carriers can weigh these factors differently, which is why rates vary between companies.

Additionally, not all car insurance companies offer the same discounts, and some companies may offer discounts that align more closely with your lifestyle. For example, if you are a parent with a student driver in your family, then you may want to look for companies that offer one or more student discounts. The best way to find the most affordable rate is to research different car insurance providers in your location and ask for a quote.

Coverage types and levels

The amount of insurance you carry can significantly impact your rate, and not only when comparing a liability-only policy to full coverage. Each state mandates its minimum coverage requirements, which differ vastly from one state to the next. Depending on your state’s minimum insurance requirements, you may pay more for a minimum coverage policy than someone else in another state.

Take the state minimum requirements for New York and California, for instance:

New York minimum requirements:

• $25,000 bodily injury liability per person and $50,000 death per person
• $50,000 bodily injury liability per accident and $100,000 death per accident
• $10,000 property damage liability per accident
• $50,000 personal injury protection (PIP)
• $25,000 statutory uninsured motorist bodily injury per person
• $50,000 statutory uninsured motorist bodily injury per accident

California minimum requirements:

• $15,000 bodily injury liability per person
• $30,000 bodily injury per accident
• $5,000 property damage liability per accident

If you are financing your vehicle, your lienholder will probably require you to carry comprehensive and collision, also known as full coverage. Many of the best car insurance companies also offer supplemental, optional riders, such as rental reimbursement, emergency road service and gap coverage.

Generally speaking, the more coverage you opt for, the higher your premium will be. It’s critical to balance price with protection, but purchasing a subpar policy to save money can cost you thousands (or more) in the long run if you are at fault in an accident. Rather than reducing or removing necessary coverage, you may want to review your policy for other savings opportunities.

Age

When insurers consider you a higher-risk driver, you typically face higher insurance premiums. Age is a significant factor when it comes to determining your risk because teen driver statistics show that new teenage drivers are more likely to get into an accident due to a lack of experience. In fact, an 18-year-old driver on their own policy pays over two times more per year for full coverage compared to a 25-year-old driver. Elderly drivers, particularly those over 80, may also be at higher risk of getting into an accident and typically face higher rates.

It is important to note that some states do not allow car insurance companies to use age as a rating factor, namely Hawaii and Massachusetts. In these two states, a 25-year-old driver and a 50-year-old driver should pay the same or similar rates if all other factors are identical.

Geographic location

Insurance premium averages can vary by state, metro and even ZIP code due to factors like minimum coverage requirements, claim frequency, weather patterns and traffic density. If you live in a state prone to car accidents, theft, or weather damage resulting in more claims, the average insurance premium is likely higher. The average annual full coverage premium in Mississippi is $2,095, for example — much higher than the average annual premium in Maine at $1,520.

Driving record

Driving record is one of the most significant car insurance rating factors. Insurance companies use actuarial data to calculate premiums. Statistically, drivers with speeding tickets and accidents as part of their driving history are more likely to engage in high-risk driving behavior in the future. Insurance companies rate this risk accordingly in their premium calculations.

For example, a driver with a single at-fault accident on their record pays an average full coverage car insurance rate of $3,283 — 42 percent higher than the average for a driver with a clean record.

How to get cheaper car insurance in 2024

Since moving to another state may not be a feasible savings option and you cannot do anything about your age, consider the other factors that go into determining your car insurance premium. There are several ways you may lower your car insurance, including improving your credit score (where allowable), being a good driver and seeking out discounts. Additionally, you can shop around at different insurance companies to see which carrier will offer you the best rate. If you are in the market for a new car, you can also get a quote for a couple of different vehicles to see which one might result in the cheapest premium.

Improve your credit score

According to the Insurance Information Institute, insured drivers with lower credit scores generally file more claims and are therefore a higher insurable risk. Taking the steps to improve your credit score may simultaneously improve your insurance premium depending on your location, your insurance company, and how drastically your score improves.

Car insurance companies determine rates differently, so just because one company places a heavy weight on your credit history does not mean that another company will do the same. Also, some states have banned or limited insurance companies from using credit as a rating factor, so depending on where you live, your credit score may not impact your premium at all. These states include California, Hawaii, Massachusetts and Michigan.

Since each provider calculates premiums differently, many insurance professionals recommend that you shop around for the best quote, even if you have lower-than-average or poor credit.

Practice good driving habits

Just one speeding ticket raises the average full-coverage car insurance rate by $488 per year. Practicing good driving habits and having a clear driving record is the most straightforward way of improving your insurance premium. If you have gotten several speeding tickets and have an accident or two, you have probably already seen your rate increase or expect a higher premium at your next renewal.

Some states offer defensive driver courses that can limit the number of points against your license and if the course is approved by your insurance company, you may be able to ask for a premium discount. Additionally, some companies offer accident forgiveness plans that would keep your auto insurance from going up in the event of one accident.

Take advantage of discounts

Even though discount availability varies by state and insurance company, discounts are the quickest way to lower your premium regardless of your age, location, and driving history. When you are getting a quote, be sure to inquire what discounts may apply to your new or existing policy. There are many types of car insurance discounts including:

• Multi-policy discounts
• Multi-car discounts
• Safe driver discounts
• Good student discounts
• Homeowner discounts
• Loyalty discounts
• New car discounts
• Anti-theft and safety restraint discounts
• Hybrid car discounts
• Employee/military discounts
• Pay-in-full or auto-pay discounts
• Defensive driving discounts
• Online/paperless discounts
• Low usage/mileage discounts
• Telematics discounts
• Senior discounts

Understanding what contributes to the cost of your insurance can help guide your financial decisions, driving behavior and how you approach looking for a provider. Although some aspects are beyond your control, you may find opportunities to lower your risk as a driver in the eyes of insurers and potentially obtain more affordable policies over time.

Shop around

Since there isn’t a standard car insurance rate that all companies use, some companies may offer more affordable prices than your current provider. By researching other car insurance companies in your location and asking for a quote, you’ll have a better understanding of how your current rate stands against the market. If you find a company that offers a cheaper premium for the same level of coverage, it may be worth switching carriers.

Frequently asked questions

• Why did my car insurance rate go up?

  While auto insurance premiums are individualized, overall changes in the insurance industry can impact all policyholders. Your rate may have increased due to changes in your driving record or driving profile, such as receiving a speeding ticket or an increase in your annual mileage. If nothing has changed with your coverage selections or rating factors, your insurance company may have filed for permission to raise rates for all policyholders due to industry conditions.

  Over the past few years, the cost of vehicle parts and repairs has risen drastically due to inflation and supply chain shortages. With extreme weather and distracted driving claims increasing simultaneously, many insurance companies have filed for several rate increases. If you are unhappy with your current rate, you could shop your policy with other insurance providers or ask your agent about any available discount opportunities.

• I want to get a new car. Will my car insurance go up?

  Policyholders usually experience a rate increase when they purchase a newer car, but not always. In this situation, rate changes can depend on what type of car you are buying, if you are adding or replacing a vehicle, what coverage you need and if any other life changes need to be accounted for. For example, if you replace a luxury vehicle that is only a few years old with a safer, budget-friendly make and model, your rates may go down since the parts for your newer car are likely cheaper.
  

• What is the cheapest car insurance company?

  There is no one-size-fits-all answer to this question — your rate will vary depending on the insurance carrier. Knowing which risk factors may raise your rate can help you to seek out the best policy or discounts for your circumstances, though. For instance, young drivers may seek out companies that offer discounts for good students, since coverage typically costs more for those under 25. If you have filed multiple claims in recent years, you may look specifically for carriers that deal with high-risk drivers. And if you know your mileage will stay low, consider a telematics program that calculates your rate based on miles driven. Research is the key to identifying which company will provide the cheapest coverage for you.