7 Reasons You’re Paying High Car Insurance Rates, According to Dave Ramsey

This post may contain affiliate links which may compensate us based on your interaction. Please read the disclosures for more information.

Anyone with high car insurance costs should read this.  

When buying auto insurance, it’s important to shop around because the cost of a policy can vary dramatically from one insurer to another. The size of the premiums that come out of a policyholder’s checking account are also determined not just by which carrier is providing coverage, but also by a variety of other factors.

Finance expert Dave Ramsey has identified seven possible reasons why car insurance premiums may be more expensive for some drivers. Motorists should be aware of them, because there are some factors they can change in order to pay less for coverage.

1. A low deductible

A deductible must be paid for covered claims by the policyholder before an insurer covers the remainder of losses. Ramsey explained that a lower deductible results in higher insurance premiums because the insurance company takes on added risk.

2. A valuable car

When a vehicle’s value is higher, insurance premiums are higher too, according to Ramsey. That’s because it would cost more to fix or replace a costlier vehicle in the event of a covered loss.

However, there could be some exceptions to this general rule. If a more expensive car has more safety features than a cheaper one, it may actually come with lower premiums due to the reduced chance of a collision or of serious injuries. Ramsey doesn’t address this issue specifically, but he says safety features impact premiums.

3. A poor driving record

Drivers who have a history of problems will pay higher rates because they present more risk. The reverse is also true, as Ramsey explained.

“Speeding tickets, DUIs and other violations will skyrocket your rates, but a safe driving record can lower it,” the Ramsey Solutions blog reads. “Some insurance companies even offer good-driver and safe-driver discounts. See if you qualify for one of these to lower your existing rate.”

4. A history of claims

Drivers who have made claims in the past are viewed as higher risk by insurance companies, as insurers generally want to avoid having to pay money out. The more claims a motorist has made on their insurance, and the more expensive the claims, the higher the insurer’s future premiums will be.

5. A long commute

The more a policyholder drives, the greater the risk they present since more can go wrong with increased time on the road. This is especially true if a commute that happens regularly takes a long time or requires traversing dangerous roadways.

“Long commutes or traveling on especially dangerous highways will increase your rates,” Ramsey advised. “That’s why insurance companies ask where you work on your application.”

6. A low credit score

Ramsey believes credit scores don’t matter, which is why it’s somewhat surprising that he points out a credit score below 600 will result in higher auto insurance premiums. He’s right to highlight this issue, though, as insurers check credit reports and scores and use those to help establish risk and set rates.

7. A dangerous location

Finally, Ramsey explained that motorists who live in areas with lots of accidents will end up paying higher insurance costs. This is usually an issue for people who live in cities versus suburbs or rural areas.

Each of these factors can affect insurance costs dramatically and, the good news is, drivers can have a positive impact on their premiums by understanding them and making changes where they can.

Anyone concerned about the cost of car insurance premiums should start thinking about how they can reduce their costs by doing things like taking a driver safety course or improving their credit. These efforts can pay off when they result in lower auto insurance premiums for years to come.

Our best car insurance companies for 2022

Ready to shop for car insurance? Whether you’re focused on price, claims handling, or customer service, we’ve researched insurers nationwide to provide our best-in-class picks for car insurance coverage. Read our free expert review today to get started.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Citigroup is an advertising partner of The Ascent, a Motley Fool company. Christy Bieber has positions in Citigroup. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

 Read More