Next to purchasing a home, a car is probably the most expensive personal investment you’ll make. While home insurance is optional, the same can’t be said for auto insurance. In every state (except New Hampshire) auto insurance is required. But why does auto insurance have to be so expensive?
Here are 5 reasons car insurance costs so much, with some additional ideas on how to lower your insurance rate.
- You’re Too Young
According to the Center of Disease Control and Prevention, drivers under 20-years old are three times more likely than adults age 20 and above to be in a fatal car accident. If you have a teen driver, the best way to lower their insurance costs is to simply wait until they’re older. And if they’re able to avoid accidents, their safe driving record could also help decrease their future premiums.
You can also consider listing your teen as an occasional operator of their vehicle rather than a principal driver. This small change could help lower the cost for the time being, but it will only work if the principal driver is a parent or guardian.
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- You Have a Low Credit Score
If your credit score is poor or not yet built up, you may be seen as a “high-risk driver”. Your credit score can impact your insurance regardless of your driving record, age, or car. By boosting your credit, you may be able to save on your insurance costs.
- You’re Paying for Full Coverage
Typically a new car owner should get full coverage for their vehicle. However, as your car depreciates in value, full coverage might not be worth it anymore (especially if you maintain an excellent driving record). Liability-only insurance can help you save and it might be all you need since it covers your vehicle if another driver is at fault.
- You Drive Less Than Your Insurer Thinks
Accuracy counts when it comes to estimating your annual mileage. If you overestimate how much you drive, it could cost you. The mileage you previously submitted to your insurance provider may have changed since you picked your plan. Take a moment to estimate how much driving you’re currently doing. Give your insurance provider a call and give them the updated figure. A few minutes of calculating could save you hundreds on auto insurance.
- You Live in an Accident-heavy Area
If you live near a congested road, highway, or shopping area, you’ve likely seen a few accidents. Your auto insurance provider may increase your insurance rate if you live in an accident-prone area. Remember to keep your insurance company updated if you move to a rural or less busy area since it may end up lowering your car insurance costs.