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Why Do Car Insurance Rates Get Expensive?

Written by Dave Benheim. Posted in Ask An Insurance Question, Rates, Research Last Updated: 03/05/2020

Wondering why your car insurance rate has become so costly? Car insurance rates can get expensive for a number of reasons, including:

  • Inflation
  • Your age
  • Your gender
  • Location
  • Driving history
  • Credit score
  • And more

In this article, we’ll explain why car insurance has gotten so much more expensive over the last few decades, as well as why it might be more costly for you. This important info can help you discover strategies to significantly reduce the cost of your car insurance:

car climbing on coins (why car ins. expensive)

In 2020, the price of car insurance was over 375 percent higher across the board than in 1985. Why has car insurance increased in price over the years? From 1985 to 2020, inflation in the cost of car insurance measured an average of 4.85 percent per year. 


This means that, for example, car insurance that cost only $500 per year in 1985 would cost $2,393.55 annually in 2020. If you’re shocked that your car insurance costs way more now than it did a decade (or three!) ago, inflation is likely the most important reason why.

Your Age
Being a young driver can massively increase the cost of car insurance. In fact, age is probably the most common and significant reason for expensive car insurance. 

Why? The data shows that young drivers (under the age of 25) are more likely to get in car accidents than more mature, experienced drivers (typically considered to be those in their thirties and above). When insuring youthful drivers, insurance companies have to account for the higher likelihood that they’ll have to pay for the expensive consequences of a car accident.
On the bright side, once you surpass the age of 25, your car insurance will almost certainly get more affordable. So if this is a factor for you, rest assured that you can look forward to cheaper insurance in the future.

Your Gender
Men almost always pay more for car insurance than women. That’s because men are more likely to have DUIs and to get into accidents, especially very dangerous accidents. 

This is particularly true for young men—past the age of 30, the gender divide in car insurance rates is less consistent.

If your location has a record of many/costly car insurance claims, you’ll be forced to pay more for car insurance. Once again, insurance companies are trying to maintain profitability, so they’re accounting for the higher probability that they’ll have to pay you more for future insurance claims.
Note that your location isn’t necessarily determined by your city or town. It’s frequently chosen based on your zip code. So if you’re wondering why your friend who lives in a different neighborhood has more affordable car insurance, that may be why. People living in cities also pay more for car insurance than those in small towns and in the country.

Driving History
Drivers who don’t violate traffic laws typically pay less for car insurance. As long as you pay them on time, parking tickets aren’t a concern. What will really increase the cost of your car insurance are moving violations, especially more than one. Car insurance companies are accounting for the fact that drivers with many moving violations and unpaid parking tickets are more likely to file insurance claims.  Furthermore, an additional factor is your driving history. At-fault accidents will significantly raise the insurance rate. Insurance companies check the number of at-fault accidents in the 3 previous years.

Credit Score
Even if you have a history of being a good, safe driver, a low credit score can contribute significantly to your insurance rates.
This depends on your state, however. Some states prohibit insurance companies from using credit scores to determine your insurance rate: Hawaii, Massachusetts, and California. 

Other Factors
These factors also contribute to high car insurance rates:

  • The type of car you drive
  • A gap in insurance coverage
  • A history of costly past claims
  • Getting off of your parents’ auto policy (being on your parents’ insurance can make it 66% cheaper)
  • Costly coverage options (optional coverages can add $1,000+ per year)


Now that you understand the causes of high car insurance rates—from systemic economic factors like inflation, to personal factors like your age, gender, credit score, and more—you have the crucial info needed to locate more affordable car insurance. 


Paying Auto Insurance with Bitcoin

Written by Todd Clay. Posted in Research Last Updated: 01/16/2018

The best auto insurance providers would ideally offer Bitcoin as a method of payment, improving the service by expanding its potential user base. The first to do so will likely see their profiles improving as a result of improving the user experience, with great customer reviews from the high-tech Bitcoin community.

More generally, since insurance companies offer savings to those who appear low-risk, electronic payment saves users an average of $28 annually. While EFTs are a fairly common option for this, others would prefer to use Bitcoin.

So why the slow adoption? First, with Bitcoin, there’s a lack of available info about clients’ credit history for companies to assess them. Second, the insurance industry tends to be more conservative, and this is just one example of that. Nevertheless, it’s reasonable to believe that if Bitcoin continues to increase in popularity, insurance companies will offer it as a payment option. 

Bitcoin and Sport Car

Self Driving Car Insurance

Written by Todd Clay. Posted in Research Last Updated: 10/12/2017

Self driving car technology: Changing the auto industry in the next 20 years

The advent of self driving car technology has the potential to disrupt the auto insurance industry immeasurably in the next twenty years.

There are already several car companies rolling out some form of “autonomous vehicle” (AV) that assists the driver:

  • Audi
  • Cadillac
  • Mercedes-Benz
  • Tesla
  • Volvo
  • Ford

All will offer vehicles in the near future that do some of the driving for you. Ford actually plans to roll out a fleet of driverless cars without a steering wheel or pedals in 2021.

Revolutionary effects

  • Reduction in auto accidents: According to a report by McKinsey & Co, widespread adoption of self-driving cars could eliminate 90% of auto accidents in the US.
  • Less need for collision insurance: With fewer accidents taking place, the need for collision insurance will plummet. In a February 2017 interview with CNBC, Warren Buffett theorized that “when a significant portion of the cars on the road are autonomous, it will hurt Geico’s business very significantly.”
  • Shrinking of auto insurance sector: Furthermore, according to a report by the global accounting firm KPMG, the personal auto insurance sector could shrink to 40% of its current size within 25 years as cars become safer thanks to self-driving technology.

Elon Musk’s perspective: reducing insurance premiums for self-driving cars

Elon Musk of Tesla has argued that insurance premiums should be adjusted to account for its cars being safer. The National Highway Traffic Administration (NHTA) has found that crash rates for Tesla vehicles have plummeted 40% since Autopilot was first installed in 2015. Musk asserts that Tesla owners should be rewarded accordingly with lower insurance premiums.


Today, the market is highly focused on service, price, and other factors. Thus, consumers are seeking out car insurance reviews before choosing a policy. It’s certain that a lot will change when insurance is bundled to the car or service provider, rather than the driver (as it is today). It may actually be similar to the fleet insurance model.

Change in responsibility for accidents–blame the automaker

As more AV technology is employed in cars, the responsibility for accidents will shift from the driver to the automaker–it will increasingly be faulty technology that will cause accidents rather than driver mistakes. Already automakers are announcing that they will take full responsibility for accidents that take place in Autonomous Vehicles. Volvo set a precedent when it announced in 2015 that it will accept full liability in the event its self-driving car gets in a crash.

Exciting possibilities

Time and accident litigation will tell how adoption of AV all shakes out. The US government will also face challenges to develop laws that reflect the new reality of self driving cars on the roads. Regulatory agencies tend to err on the side of caution, so this may end up slowing the adoption of fully autonomous vehicles. But overall, Autonomous Vehicle technology opens up an exciting new future for drivers while disrupting the auto insurance industry.
Self Driving Car Insurance

Happy 4th of July from Car Insurance Guidebook

Written by Michele Wilmonen. Posted in Research Last Updated: 08/06/2017

Keep your eyes on the road to keep your car insurance down this Fourth of July.

Fourth of July is a fun summer holiday that most of us look forward to each year. However, for all of its fun, it is also a holiday that is full of distractions that make driving on the road dangerous. Here are some tips on how to keep safe and not become just another statistic on the road this holiday.

Keep Your Car Insurance Down by Keeping Your Eyes Down

We all know that fireworks are the icing on the cake for the 4th of July holiday. It is something we usually only get to see once a year and something that grabs our attention both in the visual and audio sense. This also means that it grabs our attention away from concentrating on driving when we do hear or see one. Now, being distracted by a single firework is not usually enough to cause a car accident; a steady stream of fireworks in the air is.

If you are driving and spot a fireworks show you want to watch, do yourself and everyone else on the road a favor and pull over. That way you will stay safe and you will get to enjoy watching the show without a pesky thing like concentrating on the road interrupting you.

Another distraction on 4th of July is children running out in the road. They also are distracted by the fireworks, as well as playing with friends and even running around with sparklers. Because they aren’t paying attention, you have to be especially vigilant for them while you are driving.

Don’t Spike Your Car Insurance Rate with a Spiked Drink

Drinking on the 4th of July is as popular as fireworks are with some people. If you choose to include this in your 4th of July celebrations please don’t include driving as part of that. Stay at home, stay with a friend, or stay with having a designated driver. With the invention of Uber and Lyft, there is no reason at all for you to be getting in your vehicle after you have been drinking.

Also, there are enough distractions on the road this night without adding a drunk driver to the list of things that other drivers have to look out for. So do everyone a favor and keep your car insurance rates down by keeping off the road that night.

6 Car Insurance Claim Mistakes You Can Avoid

Written by Michele Wilmonen. Posted in Research Last Updated: 07/05/2017

These 6 car insurance claim mistakes trip most people up.

When a car accident happens, making a mistake on what you need to do with your car insurance claim is the last thing that you want to do. Usually, your car insurance ID card has an accident checklist for you to follow at the time of the accident, but here are some other mistake to avoid making during the course of the car insurance claim itself.

Mistake #1: Failing to Get the Other Person’s Information

On your car insurance ID card, it should state to collect the other person’s information. If you fail to do this at the scene of the accident you are going to have to wait until you get the police report to be able to provide your insurance company with the other person’s information or to be able to file a claim with the other person’s insurance company. This can seriously delay a claim and even cost you money you wouldn’t have had to pay out if you had collected the information at the scene of the accident.

Mistake #2: Not Gathering Fault Information at the Scene of the Accident

Don’t just tell your insurance company that you weren’t at fault for the accident, show them. Take pictures of where the cars ended up, the damage, where the damage is, and the area around where the accident happened. Your claims adjuster or the other person’s claims adjuster will not be at the scene of the accident, so you have to show them the accident. Also, if at all possible call the police and have them file a report at the scene.

Mistake #3: Not Acting Timely on your Car Insurance Claim

Call your insurance company from the scene of the accident or call them when you get home, it doesn’t matter where just call them as soon as possible. You want to file that claim while the information is still fresh in your mind. Don’t let time go by and not get your claim in.

Mistake #4: Not Buying Enough Car Insurance Coverage

This is something that you need to take care of BEFORE your accident. Make sure you have enough coverage on your insurance policy to be able to adequately cover the damage you may accidentally do to another person or their property. Keep in mind that state minimum insurance is nowhere near enough to pay for a new vehicle that ends up being totaled or for serious medical bills. Anything not covered by your policy is paid for by you.

Also, make sure you can actually afford the deductible on your comprehensive or collision coverage.

Mistake #5: Being Pushed to a Body Shop

Yes, there are insurance approved body shops you could use, but you don’t have to and don’t let your car insurance company bully you into going to one of them. If you are interested in using one of their shops, get a list of the approved ones and do your own outside research to choose the one with the best reviews. If nothing else go with the body shop you usually use and trust with your vehicle.

Mistake #6: Low Ball Offers

If your vehicle is totaled by your insurance company or the other person’s car insurance company, don’t accept the first offer they make. Take the numbers and tell them you will think about it. Then do your own research into how much your vehicle is selling for at dealerships and with private sellers. Take that information, along with the Kelley Blue Book value and give a counter offer with the information you have gathered.

Always remember that you have hired your car insurance company and the other person has hired their car insurance company for protection in times like these, you have the control to get what you need from them within the limits of the car insurance policy you or the other person purchased.

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