Car Insurance

Why are Car Insurance Premiums so high?

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The premium of any insurance policy depends upon various factors. It also differs from one insurance company to another insurance company. Like the same way, car insurance policy also depends upon various factors. Your age, job title, address and the vehicle you drive all affect the premium amount.


Your age is the most important factor in calculating the car insurance premiums. Generally, in Term Insurance or in Life Insurance the younger you are, the lower the policy premium. But it is opposite in the case of car insurance. The premium amount is higher for the person under the age of 25 years. 

According to various statistics, a younger driver is more likely to be involved in an accident than the driver over the age of 25 years. The reason for this is that due to poor driving habits and lack of experience. 

Further, young drivers switch from one insurance policy to another insurance policy to get the cheapest rate. But due to this nature, insurance companies have to incur more costs. Settings ups and servicing new accounts tend to more costly to insurance companies than holding the same customers for years. 

However, the premium amount further increases in the case of senior persons who crossed the age of 60 years. Due to poor eye-sight, lack of energy, fatigue they are also prone to more accidents.


The areas where you are living also affect the car insurance premium. If you are living in an area where the crime rate is higher, then you have to pay a higher premium amount on your car insurance. Insurance companies check the crime rate of your area and if they found that there are many crimes reported in the police, they will charge a higher premium amount.

If you are living in an area which is known for heavy traffic or accidents then there is a higher chance that you may claim your insured amount. So, the insurance companies demand higher premium amount from the person living in heavy traffic or accidents prone area as compared to a person living in less traffic. 

Type of Vehicle:

Without providing proper details of your vehicle, you can’t purchase any insurance policy. This is because your vehicle also affects the insurance premium amount. 

Generally, expensive and fast running cars have high premium amount. The reason for this is that expensive and fast running cars are more prone to theft and accidents. In case of accidents of such cars, the repairing cost is very high. So, the insurance companies demand a higher premium for expensive and fast running cars. However, a car with a lot of safety features tends to have a low premium amount.

In addition to that, the age of your car also affect the premium amount. Brand new cars have more premium amount as compared to an old car. A brand new car is more expensive to replace or repair, so the premium amount is high.

In contrast, an old car has a much lower value. So, the insurance premium is also low.

How you use your car

Insurance companies usually check the purpose of purchasing a car. If the car is purchased for renting business, then there is a high chance of damage and accidents. So, the insurance premium amount for such cars is much higher as compared to cars which are used for personal purpose.

Prior Accidents:

Car insurance companies check the driving record of the person. If the person had an accident then this is reflected in his driving records. Insurance companies charge a higher premium amount from the person if he had an accident. The number of years an insurance company can check your driving record depends upon the insurance company’s policies, rules and regulation of the state or country.

Bottom Lines:

There are many other factors which can also affect the premium amount. Finding the cheapest insurance premium rate is very difficult but you can compare them online or simple visit to your broker who deals with various insurance companies.

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