It seems that auto insurance premiums are getting higher.
and for good reason: they are.
According to AAA’s 2022 Cost of Driving Study, the average annual cost of full-coverage insurance for a midsize sedan is now $1,694. that’s more than a 20% increase compared to 2021.
While you can’t do much personally to curb inflation, you can control where your own premiums fall relative to other drivers. at least to some extent.
Below are the main factors that can lead to high car insurance premiums. I’ve also included some tips on how to minimize your fees.
reasons your car insurance might be high
record of risky driving
Insurance companies are going to want to know your complete driving record before giving you a policy. this includes any and all accidents you’ve had in the past, as well as traffic violations such as speeding tickets.
If you’ve had even a couple of accidents, recent or otherwise, you’ll pay a higher premium. the same goes for traffic violations. If you’re racking up points faster than LeBron James, you’re in trouble. lebron is rewarded for getting points, you are not.
The amounts of compensation resulting from any accident can also influence the premiums. someone who has had a couple of minor crashes is at much lower risk than someone who has totaled three cars.
That’s why it pays to have the right insurance. companies like allstate offer accident forgiveness coverage, so your rate won’t automatically increase after an accident.
read more: how much does your insurance go up after an accident? (and 6 ways to reduce it)
simply put, you (and therefore the insurance company) are at more risk the farther you drive and the more often you are on the road.
If your commute is long, it might not bother you because you can just listen to podcasts to pass the time. the problem is that you are paying a higher premium for it.
mediocre credit score
That’s right, believe it or not, insurance companies want to see your credit history. this includes all your debts, as well as tax liens, personal judgments, and medical bills.
If you have no credit history or your credit report is less than stellar, you’ll pay more for auto insurance. That’s not to say insurance companies care about how much debt you owe, but they’re looking for patterns of delinquency, liens against you, or taxes you’ve refused to pay.
Insurance companies are all about reducing your risk, and if you look risky, they’ll make you pay for it.
unreliable payment history
If you are habitually late on your insurance payments, your insurer may increase your rate or cancel your insurance altogether.
and if your next potential insurer sees a lapse in your insurance history, they will perceive you as a liability and penalize you with a higher premium because of it.
Different geographic areas have different accident rates, weather patterns, and crime levels. these variations affect your premiums.
for example, my parents’ car insurance rates doubled when they moved from ohio to florida. there are only certain parts of the country that charge a higher insurance premium.
read more: minimum auto insurance coverage requirements by state
sex, age and marital status
again, this isn’t really something you can control, but insurance companies will look at historical accident averages within different demographic groups and factor their findings into your premium.
Men, for example, tend to pay higher insurance premiums than women, especially early in their driving careers, due to higher rates of accidents and traffic violations. Insurance companies also consider married drivers a safer bet than single drivers.
this is something that is under your control. Insurance companies will want to know if you’re driving a safe, boring car or an upgraded sports car that tends to have a lot of accidents or is frequently stolen.
no matter how safe you feel in your car. If you have chosen a car that insurance companies consider risky, you will pay for it. Many times, the smaller, sportier cars get the worst of it.
also, the rumor that a red car costs more in insurance is completely false. According to esurance, “your vehicle’s year, make, model, body style and age” are what matter when it comes to your premiums.
terms of coverage and deductible
The policy you end up choosing will be a big determining factor in what you pay. Think of it like choosing a health insurance plan. if you choose the plan with all the features (or in the case of auto insurance, the coverage amounts you select), you’ll pay more.
deductibles are also an important factor. the deductible is what you pay out of pocket when you have an accident, for example.
If your policy has a low deductible (usually less than $1,000), your premiums will be much higher. while this may cost you less at the time of the accident, you will pay more in your monthly or annual auto insurance premium.
Finally, who you have on your policy can affect your rates. For example, if you have a teenager on your policy, they will be considered a “young operator” and their premiums will increase.
read more: how much does it cost to drive safely? types of auto insurance coverage you need
how to reduce car insurance costs
If you’ve read this far, you now know exactly how your rates are determined and why your actual rate may be higher than you’d like.
You can reverse many of these factors by doing the opposite of what is causing the rate to be high. but for good measure, here are a few more tips to lower your premium:
Here’s my number one tip: If you’re paying too much for insurance, make a habit of regularly searching for cheaper insurance companies.
some insurers really penalize those who travel a lot; others are more particular about their driving record. you won’t know which provider really values your driving profile unless you get quotes from multiple providers.
Other than that, your life changes rapidly. in a given year, you can change zip codes or