Cheap Auto Insurance: Why Is It so Hard to Find?

A common question many wonder about car insurance is why it is so hard to find cheap auto insurance. The answer is many-sided. The insurance industry is not cut and dry, so there are many factors that affect the cost of car insurance for every driver.

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Another issue is the perception of cheap insurance. What is cheap? The limits that define cheap insurance will vary between drivers of different backgrounds, different socio-economic levels, and different perceptions about the importance of auto insurance. What is deemed to be cheap by one person might not be cheap to another, so it is always difficult to gauge the cheapness of auto insurance.

Average Prices

Premiums for car insurance will vary from driver to driver. Car insurance costs are based on how much coverage is bought and takes into account an array of factors. Each state has an average car insurance premium that drivers can use to gauge their personal costs. The average can be used to see if you are on the low or high side of your state’s average premiums.

Finding an average is one way to determine the cheapness factor of your car insurance, though some may still not consider such numbers cheap. Generally, car insurance runs from around $800 to $1,000 a year, but obviously there are rates that are much higher and rates that are much lower.

The Rocky Mountain Insurance Information Association offers state averages for review. If your car insurance rates are a lot higher than your state average, then perhaps there are other factors at play that are increasing the cost of your car insurance coverage. One possibility is that you are the reason it is so hard to find cheap car insurance rates.

Risk Is Important

The most important thing that car insurance companies care about is how likely a driver is to file a claim in the future. Car insurance companies must take in a significantly larger amount of money than they pay out in claims, or else they would go bankrupt.

In an effort to take in more money than is paid out in claims, every car insurance provider will assess every driver’s likelihood of filing a claim for an accident or other loss in the future. Each driver is then placed into a risk category; each risk category is assigned a premium. This process is called underwriting.

Each driver may pay around $1,000 annually in car insurance, but just one car accident can cost $30,000 or more once you factor in vehicle repairs, medical bills, and other costs like towing and rental car reimbursement.

The main factor that car insurance underwriters look at to determine a driver’s risk of being in an accident is their past driving history. If you have a record of speeding tickets, accidents, and other driving infractions, then you will be placed into a high risk category and charged a higher rate for auto insurance coverage.

When you wonder why you can’t find car insurance that is cheap–that is, car insurance that is at or below your state’s average–then perhaps you need to evaluate your past driving record. Accidents and violations that result in tickets from a police officer and that are upheld by a court generally stay on your driving record for three years. Serious violations such as DUIs, hit-and-runs, and causing an accident while driving without insurance will affect your car insurance rates for much longer.

If you have had two or more violations in the last three years, you may not be able to find cheap insurance rates from a reliable insurance company because you are evaluated to be in a higher risk category.

You won’t be able to find relatively inexpensive rates until your risk is lowered.

While it will take a while to take effect, the time to work on your high risk level is right now. Taking a driving class will help, but the true solution is to have a clean driving for at least three years.

Possible Negative Factors

Your driving record is not the only factor that is used to assess your risk level, according to the experts at the Insurance Information Institute. If your driving record is clean, but your car insurance rates are still higher than the norm, there may be other factors that are increasing your overall rates.

One major factor that may be affecting your auto insurance rates is your credit history. Despite criticism from watchdog and consumer groups, insurance underwriters maintain that there is a direct link between driving behaviors and poor credit.

Essentially, those who act responsibly with their money and have good credit as a result, are more likely to drive cautiously and avoid risky driving behaviors that will lead to an accident. On the flip side, those who are careless with their money will also be careless with important assets, like cars.

If your credit history is poor and your credit score is low, then it may be negatively affecting your car insurance rates. While not all states allow car insurance companies to use a driver’s credit history as part of a risk profile to set auto insurance premiums, many still do.

The only fix if you car insurance rates are high due to a poor credit score or history is to improve your credit.

It is a process that can take a long time, but you will also benefit from greater access to credit and lower interest rates on home loans, credit cards, and car loans.

Another factor that may be affecting you car insurance rates is where you live. Urban areas generally have a higher rate of accidents and thefts than country areas; this increases your risk of filing a claim for an accident or theft simply by living and driving in that area.

While it is unlikely that you will move just to enjoy lower car insurance rates, there are a few things you can do to lower your risk. If you are able to park your vehicle in a garage or monitored parking garage, then it is much harder to steal. Similarly, installing anti-theft devices will also reduce your risk and improve your car insurance coverage costs.

The type of vehicle you drive will also affect your car insurance rates. Typically, sedans, minivans, and smaller SUVs are less expensive to insure.

Statistics show that drivers and passengers have fewer serious injuries in a vehicle like a minivan than in a truck or a sports car when in an accident.

Furthermore, some vehicles cost more to insure because they will cost more to repair or replace after an accident, theft, or other loss. Additional factors that are out of your control include your gender and your age.

Typically, women enjoy lower rates then men because statistics have shown they get into fewer accidents. Also, inexperienced drivers and very old drivers have also been statistically proven to have more accidents, according to data from the National Highway Traffic Safety Administration, so such drivers pay higher car insurance rates. If you are a young driver, the only thing to do is wait it out until you are out of the young driver category and focus on all of the other factors in the meantime.

Insurance Fraud Costs Everyone

One area that drives up car insurance costs for every driver is insurance fraud. There are many different forms of car insurance fraud, such as exaggerating the extent of damages in order to get a higher payout. The Coalition Against Insurance Fraud cites studies that estimate that insurance fraud adds $13 to $18 billion to insurance costs in the U.S.

Every driver pays a little portion of that cost of insurance fraud, as auto insurance companies pass the cost off to all of their customers. Every driver who pays car insurance premiums would realize immense savings if insurance fraud became a thing of the past.

Comparison Is the Key

One last point that may be keeping you from lower car insurance premiums is the way you buy auto insurance. If you just go to an insurance provider and pay whatever cost they come up with, chances are you will be overpaying. Every car insurance company does not charge the same amount. If they did, then there would just be one big car insurance company out there where everyone bought insurance.

However, each insurance provider has its own methods and formulas for assessing risk, and each one defines risk categories in different ways. Furthermore, each provider has its own business model that has been deemed the most profitable. For instance, one company may try to insure a high number of the best drivers and charge a low rate, while another may specialize in high-risk insurance and charge really high rates.

Basically, you can find a wide range of rates even among the biggest auto insurance companies. Savings of hundreds and even thousands of dollars for the exact same insurance coverage have been shown to be a reality through many different studies. The key is to compare rates.

Comparing rates will not affect your current rates or your credit score. You could get rates from each and every provider in your state, and the only thing it would affect is your knowledge of how much each company will charge you for coverage.

How to Compare Rates

When you compare rates, make sure to use the same amount of coverage. You can get rates from agents in person, over the phone, from insurers’ websites, or through quote comparison websites; it’s up to you.

Get rates from as many companies as possible, and you will be surprised how easy it is to find cheap, affordable auto insurance!

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