Updated: Apr 5
The Question: Why is my insurance so expensive?
The (not so short) answer:
This is the age old question that insurance agents get asked every day. As a customer, I get it; you probably feel like your insurance agent or company gives a generic answer every time that really doesn't make any sense to you. Well, I'm going to break down that question and we're going to get to the bottom of it here in this article!
Three reasons your insurance seems so high
3. Your Location
One of the most driving factors in insurance premiums is propensity for risk. Think about it like this; if you live in a densely populated city such as New York City or Philadelphia, there is a much higher probability that an accident or crime could impact you. Even smaller metro areas like Buffalo, Pittsburgh or Nashville still have a significantly higher propensity for risk than a rural farm town. Coupled with overall higher costs of living in these areas, that can make it seem like your insurance is unfairly priced versus other people you may know.
2. It's the company you keep, literally.
Insurance pricing doesn't only take into account your past history and financial situation, it also assumes the costs of every other person that you insure with in a given insurance company. When you purchase insurance from a company, say our friends at Progressive, your also sharing in the insurability of everyone else in the country that also pays into the Progressive "pot". Insurance companies have to pay the claims from somewhere, so effectively they are borrowing the money from the good drivers to pay the bad. That's why it is important to question your premium every now and again and request quotes from your agent (like yours truly) to compare against different companies.
And finally, my number one reason that your insurance is too expensive
What people don't ever really consider is their own risk profile. Now, before we get into that I'm going to tell you a true scenario of insurance that I'm pretty sure no other insurance agent I've ever met could retell.
My dear sweet Grandmother and Great Aunt are identical twins. On paper, they are virtually the same exact person to the insurance company. They live in the same apartment building, they have identical property and liability coverages, the same friends coming over to visit, a similar credit profile, the same birthday, never had any claims...all of it.
When I wrote their insurance for their renters something bizarre and unexpected happened:
My grandmother's policy was $10 per year cheaper than my aunt, even in the same company. How on earth is this possible?
Well, it really isn't that crazy. They might have 99.99999% of everything the same, but at the end of the day, they are a different risk profile because no two people are exactly the same, not even 80 year old identical twins that live next door to each other. Somewhere in the ether of the actuary tables, consumer reports and credit profiles there is just a slight enough difference that granny scored a $10 better a year deal than auntie did.
The moral of this story is that what your friends/co-workers/neighbors/family pay for their insurance will unlikely be what you pay because of precisely these reasons.
Do you want to try and look for a better rate? Give an independent agent a call. I'll be ready to talk! 1-800-424-9712
Available in NY, PA, TN, VA & FL
Taylor M Haines is the Vice President of Encompass Agency, Inc., an independent insurance agent in Buffalo, NY. He holds a Master of Science in HR Development from Buffalo State College(2016). Taylor has been in the insurance business since 2012 and writes all lines of personal and commercial insurance across five states. He focuses on insurance law and compliance, and advises several non-profit and government municipalities as well as provides worker's compensation resolution services to non-compliant businesses in New York state.