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Why Car Insurance Costs So Much

The reasons why car insurance costs so much are mysterious to many drivers. It is easy to understand why it would cost a lot to insure a brand new SUV, but when insurers come back with high rates for old buckets of rust, it really makes some people scratch their heads in wonderment. Auto insurance is extremely expensive for certain auto owners, even if the cars they drive are worthless. There are many items factored into the determination of auto insurance premiums (such as optional benefits like roadside assistance), many reasons why car insurance costs so much for so many motorists.

Young Drivers Auto Insurance

Car coverage is especially pricey for teens and young adults. Most parents of newly licensed teen drivers are expecting a rate hike when they're added to the family policy, but are still surprised when six months of coverage for the teen driver costs more than the car did. A number of risk factors go into the calculation of rates, and teens happen to be high risk in a number of ways. They are inexperienced; their age works against them; and they are perceived as overly aggressive behind the wheel and willing to take too many risks. Insurance companies, of course, do not have statistics on individual drivers except those who have tickets and accidents on their records. What they do have is an historical record demonstrating that this particular demographic is extremely likely to file claims on their policies, particularly during the first year.

Drivers in their first year behind the wheel are more likely to get into an accident that any other age demographic. The lack of experience gets even relatively talented motorists in trouble sometimes, because it is hard to anticipate the actions of others on the road or predict the performance of a car in certain situations. And in the end, lack of experience is what young drivers are really getting punished for, as is made evident in the fact that drivers up to the age of 25 pay significant youth surcharges on their premiums, making it difficult to find cheap insurance for cars.

Risk and Auto Insurance

It can be tough for auto owners to understand why it would cost more to insure an old car than the monetary value of the car, for example, but in the end car insurance is all about risk. Insurance providers in entering into these agreements with their clients are agreeing to take on a sizeable portion of the financial risk involved in these clients getting behind the wheel. The premiums we pay for our coverage help insurers recover the losses they take on claims. So it follows that high risk drivers (those of us who fit into one or more high risk categories) would end up paying more for our insurance coverage than others.

To an insurer, a driver is just a collection of risks (at least as far as premium calculation is concerned). Age is far from the only factor taken into consideration, of course. It is just a good one to use as an example because of the widely held public perception that teens pay outrageous fees for their coverage. But an automobile owner's age or the amount of time they've been licensed are not the only variables contributing to high rates.

Car Insurance Risk Factors

There are many others. One of the most important factors beyond age, believe it or not, is sex. Male drivers, especially in the under 25 demographic, pay substantially higher premiums for their insurance than females. Again, this is not to say that any particular teenage boy is a bad driver or a high risk. It is just indicative of the industry's reliance on historical data. Over the decades, men have demonstrated a greater propensity toward risk than women, and young men have contributed to more accidents and higher claims expense than young women. This is, of course, slowly shifting as women catch up with men as a group on miles logged per year and the number of so called "stressful miles" or miles driven in heavy traffic on the way to or from work or in the course of the work day.

There are many other risk factors that go into the calculation of premiums and eligibility for coverage, which can partially explain why car insurance costs so much. Geography, auto type, driving record, and even the credit history of the insured are all important considerations. Fortunately, not all insurance companies regard risk in exactly the same way. This means that no matter what your age is or what your driving record looks like, you have a chance to shop around to try and find better deals on your car insurance. In today's market, online searches are particularly effective. Shop online and discover ways to save for high risk motorists. Don't just go along with high prices when there are things you can do about them.


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