Why Is Car Insurance So Expensive?

Having car insurance means you are both cautious and prepared for the unknown, and you are also law-abiding or both because it is a requirement of the law. Thus, as a car owner, you have to accept the inevitable and pay for your car insurance.

Yet, almost always, car insurance premiums are difficult to fit into your budget because car insurance is nearly always expensive.

It is just natural to wonder. “Is car insurance necessary? Do you really need it? Is it not illegal? How can you get away with not having it? What is the penalty for driving your car without insurance? And so forth.” So many people wonder the same.

Yes, it is against the law to drive your car without car insurance. You will almost certainly not escape the law.

You will get caught either by the verification system or the police, and driving your car without insurance has consequences, often weighty, and sometimes expensive.

But, car insurance remains so expensive. Why?

What Is Car Insurance?

Car insurance is a contract, like all other insurance premiums. It is a contract between you and the insurance agency or company aimed to protect you from financial loss in the event of car theft or an accident.

After the agreement, in exchange for you paying the agreed premium, the insurer will pay your damages or losses as spelled out in your policy.

Car insurance covers:

  • Property – for instance, theft of or damage to your car
  • Medical – medical costs associated with treating injuries, and rehabilitation and often payment for lost wages and funeral expenses in the case of there is loss of life.
  • Liability – the insurer will pay your legal responsibility to other people for property damage or bodily injury
  • The law mandates basic personal car insurance, but requirements vary from state to state. The pricing of car insurance coverages is placed individually (a la carte) – per product – so that you can customize premium amounts to suit your budget and exact needs.

Car insurance concept

Policies are issued in particular time frames – usually six-month or one-year periods and they are renewable. Since you need car insurance all the time, every day, you will certainly need to renew your premium.

What Factors Affect the Cost of Car Insurance?

Car insurance is so expensive. Why?

Different factors determine the cost of car insurance. Some factors are related to driving and others are not. Some elements are things you can control, such as your mileage or the car you drive.

While some factors are things that are totally out of your control, such as your age or location. Many of the factors lead to you paying expensive premiums.

So, if your car insurance premium is so expensive, or set you back, there must be a few factors that could be driving up your rate. Here are some:

The Type of Car

Well, this is within your control, so it is your choice. Your vehicle could be too expensive or very old, and this is a factor in determining your premium pricing. A car too expensive will cost your insurance company more money to replace or repair after an accident. It may even need unique replacement parts or repair knowledge, and that is expensive. On the other side, an old car will spike your rates if it does not include as many universal parts, safety tech, or anti-theft features as other cars.

Distance Covered

Your driving patterns and distance (how far and how often) are critical determinants of your premium prices. The further you drive and the more often you stay on the road puts you at risk, with high chances of accidents, which translates to the insurer through compensation.


Where you live dictates most insurance premiums. There are many considerations in this factor, such as the area’s population demographics, weather patterns, and history of accidents.

City Flood - Montreal - Canada

Credit History

Your car insurance could be so expensive because you have poor credit. A low credit score affects your premium rates as much as it can affect a loan facility from a bank. Often, drivers with poor credit tend to file more claims.


Age is a crucial determinant in-car premium rates. Statistics show that newbie drivers – usually under the age of 25 years – are more prone to accidents than the more seasoned drivers. There are steep savings in premium rates when you go past the 25 mark.

Claim History

Your risk profile will spike if you have been involved in accidents, which resulted in a claim. However, some past claims may not affect your premiums at all.


Insurers use gender to determine the pricing of care premiums. Men tend to pay more car insurance than women. The price is even higher when you are a young man. Just like age, insurers think male drivers are more at risk than women.

The Type of Policy

The policy you select highly determines what you pay. Just like picking a health insurance plan. If your choice of plan covers everything required of car insurance, and other extras such as deductibles, you will pay more. Deductibles are also a big factor.

Lapse in Coverage

When you lapse your car insurance, insurers deem you risky and negligent, which sometimes can translate to risky driving. Thus, your rates might go up.

Involvement in Accidents

Usually, when you are at-fault in an accident, it increases your premium rates significantly.

Mature handsome man standing by the car, making a phone call after a car accident.

Cancellation of a Policy in the Past

Canceling a policy prematurely or not fulfilling a current insurance term will hurt your relationship with your insurance company, as well as other insurance providers. Insurers will never want to know the reason for cancellation, and they become hesitant to cover you, which will require that you pay higher premiums as insurance for your insurance.

Do These Factors Really Make Car Insurance Expensive?

One or a few combinations of these factors could spike the cost car insurance premiums, but a little. However, overall, car insurance rates are trending upwards.

On the other side, insurance companies are also imposing more rigid penalties or surcharges for the drivers charged with distracted driving. They are not leaving anything to chance.

Bottom Line

The rates of car insurance premiums vary a lot. The differences are based on the mentioned factors such as your age, driving record, or car characteristics. If one or more factors increase your risk of accident or theft or could cost more in insurance claim payouts, you will likely pay a higher premium. No matter what influences your rates, there will always be one policy fit for you.