Why is Car Insurance So Expensive?

Whether you’re shopping for auto insurance or you’re about to renew your current policy, it can feel oddly surprising to come across unexpected rates, especially if you’re facing a significantly higher premium.

It can feel even more surprising if your car insurance premiums are above the national average of $68 per month, or $816 per year for minimum coverage, and $225 per month, or $2700 per year for full coverage. 

It’s even possible for your car insurance rates to drastically increase compared to what you have been paying so far. According to Nerdwallet, your car insurance premium can even increase to over $4,000/year for full coverage just after a single DUI offense, or if you move to a different state or region. 

Typically, car insurance costs are determined based on personal rating factors by evaluating various factors such as your location, age, driving records, claims history, and the coverage you choose. So, the same car insurance policy can be more expensive for you, while someone else can get it at a cheaper rate. 

Now, if you’re trying to figure out why your car insurance rates are so expensive, it’s first essential to understand the key factors that drive these costs.

What Makes Your Car Insurance Expensive?

If you’re getting expensive car insurance quotes, there are various factors that can lead to higher premiums. It's essential to know how these factors influence your premiums to understand how car insurance pricing works.  

Since car insurance rates are based on personal risk profiles, your premiums may look very different from the national average or compared to someone else’s policy. If you want to review your policy or compare options, it can help to speak with a reliable insurance provider that specializes in affordable auto insurance to make sure you’re getting a fair rate. 

Yet, if you’re still getting higher premiums than expected, here’s a detailed breakdown of the key factors to help you understand what makes your car insurance rates so expensive.

Location

Your car insurance rates can be expensive, especially depending on where you live. If you compare car insurance rates across different states in the U.S., the average annual cost of full coverage car insurance is $1,760 in Wyoming, while the same coverage will cost you $4,135 in Louisiana, $4,090 in New York, $3,568 in Nevada, $3,844 in Florida, $3,207 in Michigan, and $3,119 in California. 

If you dive a bit deeper to get a more precise insight, the costs also widely vary across different cities within a state. For instance, if you look into the average car insurance rates in Michigan, the annual average cost of full coverage auto insurance in Hudsonville is $2,363 per year, and in Ann Arbor it’s $2,607 per year, whereas large cities like Detroit have a more expensive yearly premium of $5,816, while it costs $5,946 in Hamtramck, MI.  

Typically, when it comes to location, car insurance rates vary based on traffic density, road design, accident frequency, number of car insurance claims, weather risks, and local crime rates.

Age

Another key demographic factor that influences car insurance rates is age. Generally, car insurance rates are the most expensive for the youngest drivers, especially between the ages of 16 and 19.  

According to the CDC, teen drivers of this age group are three times more prone to getting involved in a fatal car accident due to reckless driving, traffic violations, and negligence. Here’s the average car insurance rate by age in the U.S. to help you compare how age can affect your premiums as follows.

Source: Bankrate | As of January 2026

Based on the car insurance rate by age, the average premiums are the highest for 16- to 20-year-olds, while the rates usually decline from 25 until they start increasing again for policyholders above 60.

Driving Records

If you have a poor driving record, your car insurance premium can significantly increase. Even a single speeding ticket can increase your car insurance rate by 10% to 30%. If you have been involved in a car accident or have violated traffic laws, particularly in the last 3 to 5 years, your car insurance rate can drastically increase, and even skyrocket. 

Here’s the average car insurance premium for full coverage based on driving history.  

• Clean Driving Record: $2,700 
• Speeding Ticket Conviction: $3,294 (22% increase) 
• At-Fault Car Accident: $3,888 (44% increase) 
• DUI Conviction: $5,211 (93% increase) 

With a poor driving record, you may be classified as a high-risk driver, which typically leads to higher insurance costs. The good news is that you can still find affordable coverage, especially through insurers that specialize in non-standard or high-risk auto insurance. 

On a positive note, it’s always possible to lower your car insurance premium over time by maintaining safe driving habits and demonstrating that you’re a responsible driver.

Car Insurance Claims History

Generally, car insurance rates increase each time you make an insurance claim after an accident. Even if you were not at fault for the accident, your car insurance rate can increase by about 10%.  

If you made an insurance claim for an at-fault accident, your premiums can increase by 20% to 30%. If it’s a more severe accident with significant damage to your car, and substantial bodily injuries, your car insurance rate can increase by 50% to 80%. 

If you have made claims for multiple car accidents, specifically in the last 3 years, your car insurance premiums can even increase by 100% or more. You may even lose coverage altogether, especially for being classified as a high-risk driver, which can make insurance significantly more expensive when you switch to another insurer.

Choice of Car Insurance Coverage

Your car insurance premium largely depends on the type of coverage you choose and the limits you select. The more protection your policy provides, the higher your premium is likely to be. 

If you purchase the liability coverage with higher limits and add optional coverage such as collision, comprehensive, uninsured/underinsured motorist coverage, gap insurance, and more, your car insurance premiums can significantly increase. 

When it comes to choosing car insurance coverage, it is essential to make informed decisions, especially to avoid unnecessarily high premiums. While additional coverage and higher limits are crucial for financial protection against accidents and unexpected events, it’s important to ensure that you’re not overinsured, which can make your policy unnecessarily expensive.

Inflation

Your car insurance is becoming more and more expensive with each passing year due to inflation. If you compare the national average car insurance premiums in the last 3 years, you will understand how inflation affects your premiums over time. 

• Average Car Insurance Rate in 2023: $2,013 
• Average Car Insurance Rate in 2024: $2,350 (16.7% increase)  
• Average Car Insurance Rate in 2025: $2,697 (34% increase) 

The reason car insurance premiums increase with inflation is mainly because car insurance is a reactionary product. Even when the price of a single product increases, it can have a chain effect on the cost of auto insurance premiums.  

Here’s a simple example: if the price of gas increases, the manufacturing cost of cars, and its components are likely to increase. This means that car repair costs will also increase due to a rise in price of your car’s components, and an increase in electric bills.  

When you claim car insurance, your insurer pays for your car’s repair and replacement costs up to your coverage limits. Now, if car repairs are more expensive, the average premiums are also likely to increase. So, as claim costs rise, insurers adjust premiums to balance the higher risk and expense.

Insurance Fraud

Unfortunately, car insurance fraud has a significant collateral effect on auto insurance premiums. According to the USI statistics, auto insurance fraud leads to an annual loss of $7.4 billion.  

Now, depending on the frequency and amount of car insurance fraud in your state, insurers can charge a significantly higher premium to cover the overall loss incurred, and also as a provisional measure to deal with fraudulent claims. 

Although insurers carefully investigate and verify claims, some fraud schemes are sophisticated enough to appear legitimate, which is why fraud remains an ongoing challenge in the industry.

Policy Lapse

It is essential to have continuous car insurance coverage if you want to ensure avoiding expensive premiums. Even a lapse in your auto insurance coverage by a single day can potentially increase your car insurance rate by 8% to 10%.  

Generally, a 30-day lapse in your auto insurance policy can lead to a premium spike by 8%. If the policy lapse is over 30 days, your car insurance rate can increase by 35% or more.

Credit Score

In most states across the U.S., insurers also refer to your credit score to determine your car insurance premiums. If you have a poor credit score, it means that you don’t pay your credit bills on time, which is a strong indicator for deferred payments.  

So, a poor credit score works as a signal to insurance providers that you may delay the payment of your premiums. This is typically viewed as a potential risk, and that’s the main reason why a poor credit score can lead to higher car insurance rates and make your policy more expensive. 

However, not every state allows insurers to use credit in pricing. In California, Hawaii, Massachusetts, and Michigan, car insurance companies are prohibited from using your credit score to determine your rates.

The Type of Car You Drive

The type of car you drive significantly affects your car insurance premiums. Typically, you can face higher premiums when you insure expensive vehicles like sports cars, luxury cars, or classic cars.  

The repair and replacement costs of these cars are significantly higher compared to regular sedan cars or SUVs. This is the reason the average car insurance premium is more expensive for these high-end cars. 

While the average car insurance premium for a regular sedan is about $2500 to $2,700 per year, the cost of insuring a sports car, or a high-end EV (electric vehicle) can range from $3,000 to $4,200 or more, depending on your car’s make and model, insurance provider, and other key factors.

Mileage and How Often You Drive

The more you drive, the higher the risk of getting into a car accident. According to the Federal Highway Administration (FHA), the average driver logs about 13,476 miles per year. Generally, 0–7,500 miles per year is considered low mileage, 7,500–15,000 miles is average, and 15,001 miles or more is considered high mileage. 

So, your car insurance premiums can significantly increase if you drive over 15,000 miles per year, as it puts you at greater risk of getting into a car accident with an increased possibility of an insurance claim.

Where You Park Your Car (Garage vs Street)

Your car insurance rate can also vary depending on where you keep it parked, especially at night. Keeping your car parked in the garage reduces the risk of theft, vandalism, weather damage, and accidental bumps.  

However, if it’s parked on the streets, it is exposed to all this accidental damage, and to a much greater extent. So, just by parking your car on the streets regularly, your car insurance premiums can significantly increase, which can make it expensive.

Your Choice of Insurance Provider

Your car insurance rate can also vary depending on the company you choose. Different insurers often charge different prices for the same driver and the same coverage because each company uses its own rating system, risk models, discounts, and underwriting guidelines. 

If you feel like your car insurance premium is expensive, you should compare it with other auto insurance providers. If it turns out that your current insurer offers a more expensive policy compared to other reliable insurers, perhaps it's time to negotiate your rate or switch to a provider that offers a more affordable policy.

Most Expensive Car Insurance Rates by State

The table below shows the average car insurance rates by state, ranked from the most expensive to the least expensive.

Source: Bank Rate | As of January 2026

Does Car Insurance Ever Get Cheaper?

Yes, the good news is that your car insurance can get cheaper. While key factors like your location, age, inflation rate, and number of fraudulent insurance claims are beyond your control, you can improve your driving records, maintain continuous coverage, and choose adequate coverage based on your needs to get cheaper car insurance coverage.  

Even if your car insurance is expensive right now, remember that it is not permanent. Also, if your current insurer charges you a higher premium, you can even switch to a reliable insurer offering cheaper premiums.

How to Lower Your Car Insurance Rate?

If you’re looking for practical ways to lower your car insurance premiums, here are some proven methods to reduce your costs. 

• Maintain a clean driving record 
• Avoid claiming car insurance for expenses that you can afford 
• Ensure having continuous coverage 
• Consider increasing your deductibles to a flexible amount 
• Explore quotes from multiple trusted insurers

What to Do if You Can’t Afford Car Insurance?

If you’re already insured, and if your premiums have increased to a level that’s beyond affordable, you should contact your insurer immediately to make necessary adjustments to your policy.   You should closely re-evaluate your choice of car insurance coverage and only keep coverages that are necessary for adequate financial protection. Yet if you’re facing difficulties affording car insurance, you can opt for the minimum state-mandated coverage.   Before renewing your auto insurance policy, you can also consider exploring other insurers to see if you can get better coverage at a more affordable rate elsewhere. On the other hand, if you’re uninsured or if you’re shopping for car insurance, make sure to compare multiple insurance providers to find a reliable insurer that offers the cheapest car insurance in your location.   If you need detailed advice regarding this issue, here’s a detailed guide on what to do if you can’t afford car insurance.

Final Tip: Work With a Trustworthy Affordable Insurer

Car insurance can be very expensive, depending on your location, driving records, insurance claim history, choice of coverage, and other key factors. While it’s a good idea to explore cheaper coverage, it’s even more essential to get car insurance coverage from a trustworthy insurer that offers an affordable car insurance policy.  

If you’d like guidance or you’re interested in reviewing your options, feel free to contact us for a free quote. Our experienced insurance consultants can help you find the right protection at a price that fits your budget.

Frequently Asked Questions (FAQs)

Why is car insurance so expensive nowadays?

Car insurance has become more expensive due to rising repair and medical costs, inflation, higher accident and claim rates, increased vehicle prices and technology costs, and insurance fraud. Insurers pass these higher claim expenses on to policyholders through higher premiums.

Is it normal to pay $200 for car insurance?

Yes, it’s normal if you’re paying $200 a month for full coverage. On average, full coverage car insurance premiums cost about $225/month, so if you’re paying $200/month for full coverage, your premiums are slightly cheaper compared to the national average.

Is $300 a month for car insurance bad?

Paying $300 a month for car insurance is higher than average for most drivers, especially for full coverage. However, it may be normal if you’re a young driver, have recent accidents or violations, drive a high-value vehicle, or live in a high-cost state.

Why am I paying $400 a month for car insurance?

Paying $400 a month for car insurance usually means one or more high-risk factors are affecting your rate. Common reasons include being a young or inexperienced driver, having recent accidents or tickets, living in a high-cost state or city, driving an expensive or high-performance vehicle, carrying full coverage with high limits, having poor credit (in most states), or a recent lapse in coverage.

Can you negotiate car insurance rates?

You generally can’t negotiate car insurance rates the way you might with a store price, because insurers use fixed rating formulas. However, you can often lower your premium by asking about discounts, adjusting your coverage or deductible, improving your risk profile, or comparing quotes from other insurers and switching to a cheaper policy if needed.