Buying car insurance is never cheap. It is an important investment to avoid much greater inconveniences in the future due to your own or another driver’s recklessness.
Sometimes, it goes beyond the definition of “not cheap” and becomes “excessively expensive.” Therefore, many people wonder why their insurance is so expensive. It comes down to several factors, and the answers are simple.
Why don’t insurers always offer the same prices?
Before we start discussing the various factors influencing prices to determine why an insurance policy may be getting so excessively expensive, we must understand why these differences exist.
Insurers, just like any other company, try as much as possible to decrease their risk margins and increase their profit margins. In this way, they achieve faster growth and, above all, permanence over time.
To achieve these benefits, they must evaluate how feasible it is to insure each car, depending on factors of both the vehicle itself and who drives it.
As long as a car or its driver presents greater risks, the insurer offers more expensive policies because of the high possibility of having to cover expenses from that client at some time.
Thus, since there are so many possibilities of an accident, theft, damage, etc., the insurer tries to cover future expenses with the premiums paid by the client.
For example, a customer who will likely at some point, sooner rather than later, cause them to spend more than $10,000 is not profitable if they pay a monthly premium of $100. Instead of making them a profit, they would be causing a loss.
On the other hand, if a customer is unlikely to see you as a potential loss, your fees can be quite low. You have greater security about not having to cover accidents.
What factors affect the price of an insurance policy?
Having clarified the above, we can begin to discuss the factors that make an insurer more or less risky. Although there are several, each one is quite influential in a greater or lesser way on the price of a policy.
The crime rate of the location
Not all locations are equally safe; depending on whether an area suffers from a high or very low crime rate, the insurance price may be higher or lower.
Places with a very high crime rate, where thefts are relatively common, are much more likely to suffer the loss of a vehicle; therefore, the rates established for such places are usually much higher than others.
On the other hand, a low crime rate represents a low probability of suffering a theft in that location. In such cases, insurers can offer much lower premiums, even less than half the price.
The same is true for certain vehicles. Because their security measures are very common and easy to overlook, some cars may be much more susceptible to theft than other makes and models.
For these cars, very high insurance rates are presented. A particularly vulnerable vehicle in a place where frequent thefts occur will most likely result in an unpleasant insurance premium.
The member’s driving record
The more damaging a driver’s driving record is, the higher the insurance policies will be. If drivers consistently have serious or minor accidents, they will probably continue to have them even after being insured.
Thus, with such a high probability of having an accident due to poor driving habits or being too careless with the maintenance of his vehicle, the insurer takes for granted the fact that they will continue to have accidents.
Since they are responsible for covering both accidents and medical expenses, a company is obligated to impose a fairly high insurance premium. All of those mentioned in this list are probably among the most influential.
A person with an impeccable driving record or very few life-long driving problems represents a fairly low risk, and their premiums can be much less expensive.
Is the driver too old or too young?
In this section, there are two aspects of age. In the first one, if the driver is an older person, usually over 70 or 65 years old, their reflexes, speed of response, and several of their senses have significantly decreased.
Therefore, although they may usually drive in a very prudent and calm manner, they are very prone to not react in time to the actions of another driver. And even if they did not cause the accident, they could have avoided it.
In such situations, the insurer should cover what is covered by the policy. As the elderly are prone to such cases, the insurer should charge a higher premium.
On the second side, some drivers are too young and, due to excessive self-confidence or a lack of experience, tend to drive recklessly.
Although not all young drivers act this way, a large percentage do. The insurer must charge high premiums to assume the necessary expenses to take the risk.
The gender of the driver
Although one might expect the opposite because of the idea that women do not drive as well as men, insurers, in their experience, find the opposite truth. Generally speaking, men tend to be more reckless when driving at high speeds or breaking several important rules.
As a result, their insurance premiums tend to be higher. They can reach up to approximately 20% more than the costs established for women. The range tends to be lower as age advances.