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Why Car Insurance is So Costly

Car insurance is so costly because insurers not only base your rates on your own record, but on the records of people of like age and gender, among other traits. When a teen driver passes driver's education and goes out to buy his first car, his parents might be a bit nervous at first, picturing him driving all over the road, blaring the radio, maybe getting into an accident. Then their worries are all of a sudden superseded by panic: the car insurance bill arrives reflecting his inclusion on the policy. Even though his car is nothing but an old scrap heap, somehow he adds hundreds of dollars to the cost of the family auto insurance bill.

Car Insurance about Risk

It is funny sometimes thinking of the fact that most teens driving old, beat up cars actually more than the car's value in a six month car insurance policy period. It is interesting how these things can be true; but then again, one only has to be reminded what car insurance really is: an agreement between two parties regarding the assumption of risk. We essentially pay auto insurance companies to assume financial risk on our behalf.

States mandate auto insurance of some kind for all drivers, and drivers who have been on the road for some time and who have demonstrated a tendency to be safe and to avoid trouble are looked upon as a good risk by auto insurers. But new drivers, on the other hand, the ones that do not have experience and who are known to make aggressive and "risky" decisions, are seen as a bad risk. Since teens are more likely to get into accidents than any other age group, they pay an inordinate amount of money for their car insurance protection. This is so that in assuming that high risk of a claim, the instant auto insurance companies taking them on as clients have a chance to recoup their possible losses.

Each Driver Evaluated on Risk

Risk rules the car insurance world. Risk assumption and risk reduction are some of the major principles auto insurance companies live by. There are many different factors that have been historically tied to higher or lower risk. For example, gender, age, driving record, marital status, zip code where the car is parked, and even the type of car being insured all contribute to this overall picture of the risk a client poses to the insurer. To a car insurance provider, each driver is nothing more than an aggregate risk factor determined by taking into account everything they can know about that driver without actually spying on them and watching them to see exactly how they drive.

Insurance companies cannot know for sure how good (or bad) of a driver you might be. They might see some clues in your driving record, a record that probably can work more to your advantage as time goes by and you stay out of trouble, but most of their information they can use to evaluate you is indirect. In other words they are not really evaluating you at all, but some mathematical model of what you are statistically likely to be based on a compendium of all risk factors. If you are a young man, unmarried, and you drive a flashy sports car, you'll likely be grouped in with high risk drivers, even if you're actually astonishingly gifted and cautious as a motorist.

Some drivers fitting these types of profiles are actually rejected entirely by certain auto insurance companies. Most providers these days have a certain broad profile of the type of motorist they want as a customer. Most of the mainstream traditional companies are looking for standard and preferred policy type drivers. But many nontraditional companies have realized that they can offer much better prices to non standard or high risk drivers than traditional companies, and thus have decided to focus in on them in an effort to build market share.

Save Money on Car Insurance

When we see things like this happen in the car insurance market, we come to realize that no single company can efficiently service every driver. The next step in this realization is to discover that if you have been overpaying for your auto insurance coverage, it is very likely that better prices await you. You only need to figure out where.

Online auto insurance shoppers understand the ease with which we can get a search underway in order to find better prices on an auto policy. As a driver, you're more than just a conglomeration of risk factors. You're also a person and a consumer as well. Make smart choices as both a driver and a consumer, and save money by getting quotes on auto insurance online. Car insurance can be costly, but you can save money by making wise insurance choices.


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