Why is Car Insurance so Expensive?
Let's look at some of the reasons your car insurance might be more expensive than you'd like.
Why is auto insurance expensive?
If the cost of your car insurance is creeping up, it could be due to a number of factors related to who you are and how you drive — along with world events that could spur insurers to impose premium increases on auto insurance. Many factors — related to driving and otherwise — lead to expensive auto insurance premiums. Age, driving record, credit score and insurance history are a few important components that contribute to car insurance rates. In fact, 39% of Zebra customers used our service because they felt they were paying too much for car insurance.Â
We outline below some common reasons auto insurance rates are so high, along with some ways to reduce your insurance rates.
Why car insurance is so expensive in 2024
- Inflation is the most significant cause of premium increases in 2024, with the average cost rising to $1,760 from $1,529.
- This has also driven increases in the costs of new and used cars and healthcare. Because car insurance covers much of these expenses after an accident, upticks in the price of cars and healthcare mean higher rates.
- Another factor is that the cost of doing business has also been increasing: economic trends of supply chain disruptions and labor shortages have driven up operating costs for insurance companies.
- After much of 2020 saw drastic reductions in driving habits, leading to fewer claims, a rebounding to pre-pandemic driving patterns has led to surges in claims and accidents.
1. Age
Car insurance companies conflate age and driving experience. Drivers younger than 25 often pay more for car insurance than do older drivers, due to a perceived lack of driving experience, and are considered higher risk. A young driver between the ages of 16 and 24 will pay 136% more for car insurance than a driver between the ages of 25 and 75.
| Age Group | Avg. Annual Premium |
|---|---|
| Teens | $5,340 |
| 20s | $2,373 |
| 70s | $1,842 |
| 30s | $1,753 |
| 40s | $1,671 |
| 60s | $1,584 |
| 50s | $1,562 |
As a driver ages, their auto insurance rate typically decreases. Drivers see big savings on their 19th, 20th and 25th birthdays, specifically.
Young drivers should be especially mindful of displaying good driving habits. A bad driving record coupled with an age of less than 25 will lead to high premiums.
Additional information
The Zebra’s Dynamic Insurance Rating Tool data methodology
The Zebra’s Dynamic Insurance Rating Tool for home and auto insurance rates utilizes the latest ZIP code-level rate filings from across the U.S., sourced from Quadrant Information Services and S&P Global. These filings, typically updated annually or biennially by insurers, are verified through Quadrant’s QA process and then integrated into The Zebra’s estimator.
The displayed rates are based on a dynamic home and auto profile designed to reflect the content of the page. This profile is tailored to match specific factors such as age, location, and coverage level, which are adjusted based on the page content to show how these variables can impact premiums.
For a comprehensive understanding, see our detailed methodology.
2. Credit history
Credit score is a primary contributor to a driver's car insurance rate. Federal Trade Commission (FTC) studies show drivers with poor credit file more claims than drivers with high credit scores (and file more costly claims). These drivers pose considerable risk to car insurance companies. On average, drivers with credit ratings in the "Worst" tier (300-579) pay $1,880 more per year than do drivers with credit scores in the "Excellent" range (800-850).
| Credit Tier | Avg. Annual Premium |
|---|---|
| Worst | $3,836 |
| Poor | $3,147 |
| Below Fair to Poor | $2,730 |
| Below Fair | $2,461 |
| Fair to Below Fair | $2,250 |
| Fair | $2,071 |
| Average | $1,913 |
| Good | $1,760 |
| Very Good | $1,627 |
| Excellent | $1,506 |
Each tier of credit score improvement comes with an average savings of 19% — or $440 annually — on auto insurance premiums.
If you have a clean driving record but think your car insurance rate is too high, check your credit score and see if it needs improvement. Even moving from the "Worst" credit tier to "Poor" yields the most savings — 18% or $689 per year.
3. Driving record
A driver's auto insurance premium could be expensive because of recent claims or driving violations. Speeding tickets, at-fault accidents and DUIs have major implications on insurance premiums. After any violation or claim, an insurer will upcharge a driver for three to five years. In California, drivers can be charged for up to 10 years after being convicted of DUI.
Below are some of the most expensive driving violations and their impact on rates. For example, a driver convicted of a hit-and-run should expect their premium to increase by an average of $1,717 per year, or $143 per month.
| Accident/Violation | Avg. Annual Premium |
|---|---|
| None | $1,759 |
| Not-at-fault accident | $1,834 |
| Speeding 16 - 20 MPH over limit | $2,190 |
| At-fault accident - greater than $2000 | $2,605 |
| Reckless driving | $3,187 |
| Driving with a suspended license | $3,195 |
| Racing | $3,291 |
| Refusal to submit to a chemical test | $3,405 |
| DUI | $3,441 |
| Leaving scene of an accident/hit and run | $3,476 |
Comprehensive claims, generally considered to occur outside of the control of the driver, increase premiums by lesser amounts. On average, a comprehensive claim raises rates by $90 a year.
Not-at-fault accidents can also lead to elevated rates. Even when a driver was not at-fault in a collision, car insurance companies raise rates to cover the cost of the claims adjuster and overhead fees. Even without filing a claim, driving history could be a reason for high auto insurance rates.
| Accident/Violation | Avg. Annual Premium | Percent Difference |
|---|---|---|
| None | $1,759 | 0% |
| Not-at-fault accident | $1,834 | 4% |
| One comp claim | $1,849 | 5% |
4. Your location
Car insurance is regulated at the state level and priced at the ZIP code level. A driver could end up paying high car insurance rates because of claim frequency in their neighborhood or because of legislation in their state. Let's look at some of the most expensive states for car insurance.
Michigan
Michigan is a notoriously expensive state in which to insure a vehicle. Michigan drivers pay 24% more than the national average for car insurance.
Three primary factors contribute to Michigan's high auto insurance rates:
- Michigan requires no-fault insurance with unlimited Personal Injury Protection (PIP).
- The insurance coverage options offered in Michigan attract insurance fraud, litigation fees and expensive healthcare bills.
- Insurance companies have to charge higher premiums in Michigan to earn a profit.
The recent pricing trend in Michigan leans toward less expensive car insurance costs. While Michigan rates may have decreased in the last three years, the national average has increased, making the gap between the two figures smaller.Â
| Year | Avg. Annual Premium — Michigan | Yearly Change — Michigan | Avg. Annual Premium — US | Yearly Change — US |
|---|---|---|---|---|
| 2022 | $2,176 | -$463 | $1,760 | $231 |
| 2021 | $2,639 | $104 | $1,529 | $46 |
| 2020 | $2,535 | -$571 | $1,483 | -$61 |
| 2019 | $3,106 | $222 | $1,544 | $23 |
| 2018 | $2,884 | $1088 | $1,521 | $84 |
| 2017 | $1,796 | $234 | $1,437 | $69 |
| 2016 | $1,562 | -$323 | $1,368 | $88 |
Michigan's average car insurance rates are 63% more expensive than the combined average of neighboring states: Illinois, Wisconsin, Indiana and Ohio. Even with a great credit score and no claims, living in Michigan can cost you.
Florida
Florida is the most expensive state in which to get car insurance, with a statewide average of $2,923 per year.
The major reason for this is the insurance companies' loss-to-profit ratio in Florida. Hurricanes and flooding result in car insurance companies paying out heavy claim losses on a regular basis.
Another reason why Florida is more expensive than average is its no-fault insurance. Although it does not require as much coverage as Michigan’s no-fault coverage, the state requires drivers to carry Personal Injury Protection at a minimum of $10,000.
Additional information
| Year | Avg. Annual Premium — Florida | Yearly Change — Florida | Avg. Annual Premium — US | Yearly Change — US |
|---|---|---|---|---|
| 2022 | $2,923 | $498 | $1,760 | $231 |
| 2021 | $2,425 | $101 | $1,529 | $46 |
| 2020 | $2,324 | -$1 | $1,483 | -$61 |
| 2019 | $2,325 | $218 | $1,544 | $23 |
| 2018 | $2,107 | $170 | $1,521 | $84 |
| 2017 | $1,937 | $63 | $1,437 | $69 |
| 2016 | $1,874 | $330 | $1,368 | $88 |
Louisiana
As of 2024, Louisiana is the second most expensive state for car insurance.
Like Florida, Louisiana is considered a high-risk state from the perspective of insurance providers, with an increased likelihood of claim losses due to how often hurricanes, flooding and other natural disasters can occur. This directly impacts insurers' bottom lines, resulting in high premiums for consumers.
The average cost of auto insurance in Louisiana is a whopping $2,702 per year — that's 24% more than Michigan.Â
Additional information
5. Your car insurance company
You can't swap states simply because Texas has a higher cost of car insurance than Oklahoma — nor can you improve your credit score overnight. The only instant action you can take to lower your premium is to switch car insurance companies, as one of the primary reasons you might be paying too much for car insurance is who you're insured with. Some companies are more expensive than others, no matter your driving profile.
Why is car insurance so high for you? Enter your ZIP code below to calculate your rates and receive quotes from major car insurance companies.
Find an affordable insurance company: compare rates online.
Will rates go back down in 2024?
It’s unlikely that the factors contributing to high car insurance rates will be sufficiently solved to see significant changes in premiums in 2024. The biggest problems that the 2023 insurance market faced — inflation, supply chain issues and labor shortages — are still a present threat for 2024. In addition, increased instances of natural disasters are resulting in more claims being filed. If an accident results in injury, high medical costs are draining car insurance companies as they pay out claims. To recoup losses, insurers transfer this risk to policyholders in the form of higher premiums.Â
So while it's too soon to say definitively, the best thing you can do in the meantime is to look at the personal factors that affect your rate — especially if you've had any recent accidents or citations, aged out of your teen years or twenties or improved your credit. You can also reconsider your coverage: if your driving levels have changed, could telematics car insurance save you money? With the cost of repairs and vehicles going up, would it make sense to increase your liability limit?
Taking your time and diligently comparing quotes can pay off by finding an auto insurance policy that meets your coverage needs while helping you save in the midst of rising costs worldwide.
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About The Zebra
The Zebra is not an insurance company. We publish data-backed, expert-reviewed resources to help consumers make more informed insurance decisions.
- The Zebra’s insurance content is written and reviewed for accuracy by licensed insurance agents.
- The Zebra’s insurance editorial content is not subject to review or alteration by insurance companies or partners.
- The Zebra’s editorial team operates independently of the company’s partnerships and commercialization interests, publishing unbiased information for consumer benefit.
- The auto insurance rates published on The Zebra’s pages are based on a comprehensive analysis of car insurance pricing data, evaluating more than 83 million insurance rates from across the United States.