UPDATED: NOVEMBER 03, 2022 | 3 MIN READ
Car ownership is less of a luxury than a necessity in many places. That said, the experience is far from inexpensive. In addition to maintenance, fuel, and the cost of purchasing the vehicle, it isn’t cheap (or optional) to ensure you’re adequately insured. And all of that doesn’t even account for the car insurance increases most people seem to see annually.
So, how does car insurance get so expensive? What are the maximum impacts on insurance premiums, and how many are avoidable or at least flexible? Here is a guide to understanding the full effects of auto insurance rates in 2022 to help you better navigate your expenses.
Auto Insurance Impacts By Your Policy and Car
A large portion of your car insurance premiums is determined by the specifics of your policy and car. While some costs in these areas are unavoidable, there is also the potential to optimize your insurance rates.
Make and model of the car
Since different cars have different levels of expenses, the type of car you drive will inevitably factor into the cost of your insurance. If you insure a pricier vehicle, you will face a more expensive insurance rate since there are higher costs on the line in the case of an accident.
It is important to note that in addition to flashier and more expensive cars, these raised rates can also apply to electric vehicles and cars that are statistically most often the target of crime. For instance, the 2006 Ford Full-Size Pickup was the most commonly stolen vehicle in 2020. Since car insurance rates are ultimately calculated based on the degree of risk, owning this vehicle (or living in an area with high crime rates) will boost the price of your policy.
As is the case with any insurance, insurance deductibles are an essential factor in the overall cost. There is often flexibility with plans that allow you to choose between different levels of deductibles for different resulting prices.
The most common deductible levels are $500 and $1,000. The $500 deductible has an average six-month premium of around $700-$800, while the $1,000 deductible tends to save you about $100 on the same policy. That said, in the case of a claim, you will be liable to pay more out of pocket.
Understanding how deductibles work and how best to balance reasonable deductibles with affordable insurance rates is a crucial part of optimizing your insurance experience.
Level of coverage
Ultimately, the price of your auto insurance premiums most relies on your coverage level. Depending on your budget and needs, it’s essential to select the policy that fits you best carefully.
Different policies cover different areas of risk. The standard auto insurance coverage areas are liability coverage, collision coverage, uninsured motorist coverage, and comprehensive coverage. The average cost for liability insurance typically runs about $172 each month. The price is similar for other types of coverage as well.
If you want to save on your monthly insurance costs, you can elect to receive lower coverage. Of course, this passes on the burden of risk to you in the case of an incident, so it boils down to personal preference on this front. Many car insurance companies also offer bundling opportunities or discounts.
Car Insurance Increases You Affect
While you have a certain degree of control over exterior impacts on your insurance rates, there are also elements of your unique circumstances that are out of your control. This includes both your personal history and demographics.
Previous car insurance claims
Your driving history follows you for years. This is excellent news if you’re a safe driver with a clean record, but a word of caution if you’ve acquired tickets or been involved in accidents resulting in insurance claims.
On average, drivers can expect around a 42% increase in the cost of their car insurance rates once they’ve filed a claim. Insurers can see this by searching the Claim Lost Underwriting Exchange (CLUE), so the added cost is not avoidable by changing policies or providers.
Fortunately, your driving record eventually resets after a few years, giving you the chance to make the most of a clean slate. However, several years is longer than it may seem, so it is in your best interest to drive as safely as possible to avoid filing claims in the first place.
It may not feel fair, but demographics have a notorious role in your auto insurance cost. Age, gender, and marital status can all lead to higher premiums.
Insurance rates are typically higher for young drivers, especially teenagers. Teen drivers pay roughly $400-$500 more years for their auto insurance policy than any other age demographic since new drivers have the highest risk of accidents and speeding tickets. Costs drop dramatically after age 25 and start to increase again for older drivers.
|Age Group||Average Annual Cost|
Another unavoidable trait that impacts car insurance rates is gender. Women will typically pay roughly $1,000 each year than men, with costs being an average of $3,397.26 compared to $2,372.60.
That said, the following states don’t use gender to calculate premiums:
Lastly, your marital status is a surprising demographic factor often used in calculating quotes. Insurers consider married individuals to be more financially stable and safer drivers. They pay around $100 less yearly than single, divorced, or widowed drivers.
Does Credit History Affect Car Insurance Increases?
Finally, as with most financial endeavors in life, your credit score also has a part to play when determining the cost of your auto insurance. The difference between the rate for an individual with good credit and an individual with poor credit can run around $1,500.
Studies have shown that individuals with poor credit typically pay 115% higher rates than those with excellent credit. This solidifies credit score as one of the most crucial factors in insurance prices.
That said, several U.S. states don’t utilize credit history when determining quotes:
How long do prior claims or traffic violations impact my insurance rates?
This varies between car insurance companies, but the standard window is 3-5 years.
Can I get my insurance premium reduced?
Yes. While all insurance companies have different policies and discounts, the most effective way to achieve rate reductions is through consistently safe driving habits.
Why do demographics matter when it comes to a car insurance increase?
Ultimately, insurance rates are calculated through the assessment of risk. Insurance providers do this by incorporating data and research that commonly indicates a higher risk of accident or loss, including location, age, and gender.
I’m a safe driver – does that help with insurance costs?
Absolutely. Many insurance companies have programs that directly reward a clean driving record through lowered premiums or vanishing deductibles.
Is a higher deductible worth the monthly savings?
This heavily depends on your driving history and confidence regarding potential accidents. A high deductible can put you in a financially stressful situation if you regularly drive in a risky area or have an account of collisions. It’s also important to remember that even if you have a clear history and drive conservatively, accidents can still happen.
Car Insurance Increase? Find a Better Rate
Ultimately, the person who best knows your unique needs from your auto insurance is you. You also want to ensure you have all the information necessary to make the right choice. Get several car insurance quotes today to ensure you find lower rates without compromising full coverage.