Why Car Insurance Costs So Much

Car insurance costs so much because the insurance company gives a rate based on your driving record, claims history, and reputation.
Written by Nicholas Wilson
Reviewed by Carrie Adkins
Car insurance is expensive, no matter who you are. After all, it is a business, one where companies want to make a profit off you.
Prices vary from state to state and from individual to individual, but it remains true no matter who or where you are that insurance is expensive. When you combine
car payments
,
routine maintenance
, and emergency repairs with the price of insurance, owning a car can become a strain on any
budget
.
It’s important to make sense of why car insurance costs so much by taking a look at what goes on behind the scenes. So, here's why car insurance can get so pricey, with a little help from
car insurance
comparison and broker app
Jerry
.
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How does car insurance operate as a business?

Keep in mind that insurance is a business. Like any other business, insurance companies need to turn a profit in order to sustain the company in existence and provide valued services to you. This means that the price you pay for insurance is carefully calculated in order to contribute to the overall financial success of the company.
There are a wide variety of insurance plans, and the cost is going to depend largely on what your plan covers. As with anything, more services mean you pay a higher rate in exchange for those services.
If you have a very basic plan that only covers what is mandated by law, then you’re going to have a smaller bill than someone else whose plan has lots of extra benefits included, such as new car replacement or loss of use coverage.

How do car insurance companies determine your rate?

Some common indicators of risk might be an erratic driving record, a history of accidents and other claims, and possibly even credit history. In the eyes of insurance, these factors paint a picture of your future driving behavior and the likelihood that you will cost the company money.
The greater the likelihood you will get in an accident, for example, the higher your rate, since the insurance company is obligated to pay for whatever costs you incur that they promised to cover. In the end, you are willing to pay a premium for the peace of mind that the insurance will be there for you, and they charge you a premium based on the likely cost to cover you.

Why are car insurance prices so high?

These indicators reliably quantify how much financial risk a driver poses to the insurance company. If you are known to drive dangerously and get into accidents, these means you will very likely have a higher rate, since your insurance will be picking up the tab for your driving mistakes.
On the other hand, if you have an impeccable driving record and have no demerits counting against you, it is likely that you will have a lower rate since you are not a financial liability.
In effect, the insurance company is trying to match up how much you will cost them to how much you should pay. The rate you are given is a prediction, then, of how you are expected to behave as a driver.
Key Takeaway Insurance rates are basically a prediction of how save you'll be as a driver, based on your past record.

How can you get cheap car insurance?

As we've covered, car insurance is an expensive investment. However, it doesn't have to break the bank, especially if you compare rates using car insurance comparison and broker service
Jerry
. A licensed broker, Jerry does all the hard work of finding cheap quotes from the top name-brand insurance companies and buying new car insurance. Jerry will even help you cancel your old policy.
And to ensure you always have the lowest rate, Jerry will send you new quotes every time your policy comes up for renewal, so you’re always getting the coverage you want at the best price.
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