Why is Insurance so Expensive?

Why is Insurance so Expensive?

July 06, 2022

Insurance comes in many different forms: life, health, auto, property…you name it.  If there’s one constant, it’s the fact that everything is subject to change.  We can’t prevent the unexpected from happening, but we can take measures to mitigate the risk.  That’s why we have insurance. 

Unfortunately, insurance can be expensive.  It’s important for you to know some of the factors that can impact the prices of the policies to help you get an idea of what to expect before you apply.  

Key Takeaways


  • Insurance can be expensive.  Each type of insurance has different factors that can change the cost of your premium.  

  • Most insurance premiums vary based on age and your history with the subject being insured.  

  • The best thing to do is compare quotes with different insurance companies and understand the factors that impact premium costs so you can make changes accordingly.  


Life Insurance

With life insurance, premiums are based on a variety of factors.  The price of your policy will be determined by your unique situation.  There are a few common factors across providers that can affect your life insurance premiums or payments that you should know.  

1. Age

The older you are, the more you’ll pay for your life insurance.  Younger applicants tend to get the best value because you tend to have a longer life expectancy.  For example, a 30-year-old is likely to live longer than an 80-year-old.  Because they are statistically less likely to pass away any given year, they have more time to pay life insurance premiums per year.  

2. Gender

Females have a longer life expectancy than males.  This disparity means women generally pay less for life insurance than men.  

3. Health

When you apply for life insurance, the company usually checks your medical records (existing conditions, weight, cholesterol levels, etc.) and may ask you for other medical tests to determine your health.  Insurance companies use this information to determine how healthy you are and how likely you are to develop a life-threatening condition.  Generally healthy applicants typically pay less.  

In addition, they may ask to see your family history.  Even if you are generally healthy, your family may have a history of illness, which could factor into the cost of your coverage.  

4. Lifestyle Habits

Tying into health, other lifestyle habits may factor into price.  Let’s say you use tobacco on a daily basis.  This can lead to serious health problems, and this information could lead to your life insurance costs being more expensive.  

5. Job/Hobbies

Aside from smoking, insurance companies take into account your occupation.  If you’re a police officer, a pilot, a roofer, or in some other role that comes with a lot of risks, your life insurance cost may be higher.  

Though it’s not your job, if you regularly undertake any risky hobbies like skydiving or racing, this may also impact the cost of your life insurance.  

What can you do?

Now that you understand these factors that affect life insurance premiums, you could work on making changes in your lifestyle—losing weight, quitting smoking, and more—that can help lower the cost of life insurance.  

Health Insurance

Some of the factors that impact the cost of health insurance are similar to those that impact life insurance premiums.

1. Age 

Like life insurance, age can also affect the cost of health insurance.  Health insurance premiums are generally more affordable for younger people because they tend to be healthier.  

2. Lifestyle Habits

If you smoke, your health insurance premiums could be higher, as you’re more likely to have or develop health problems.  

3. Location 

Different locations have varying rules and costs of living, which can impact your health insurance premiums.

4. Members of Your Plan

There are individual plans and family plans.  If everyone in your family individually has health insurance, you may be better off getting the family plan.

5. Type of Plan

There are four different types of plans with differing premiums, deductibles, and out-of-pocket costs: Bronze, Silver, Gold, and Platinum. 

What can you do?

Like with life insurance premiums, you can make adjustments to your lifestyle to help lower your risk.  Additionally, you can contemplate who you want on your plan and the type of plan that fits your situation the best.  

Auto Insurance

Here are some common factors that affect auto insurance costs: 

1. Age

Unlike life and health insurance, younger drivers are generally seen as riskier due to their perceived lack of experience.  Teen drivers especially are seen as risky and expensive to insure.  

2. Driving History

Insurance companies see your driving history as a predictor of future performance.  If you’ve gotten a lot of tickets, then your insurance might be more expensive.  

3. Location

Where you live can affect car insurance rates.  Each state has their own laws, with different minimums and categories of required coverage.  

4. Type of Vehicle

Insurers consider the make and model of your car.  A car with high safety ratings can result in lower insurance rates.  Bigger, safer cars tend to have more affordable insurance.

5. Credit Score

Believe it or not, car insurance companies sometimes consider credit scores when setting premiums.  Drivers with poor credit or no credit history tend to have higher premiums.  This is because statistically, drivers with poor credit are more likely to file a claim against their insurance than those with good credit.  

What can you do?

Compare quotes across insurers.  Companies will charge different prices.  Additionally, some car insurance companies offer discounts that insurers may keep in mind.  These can include driving classes, being a student driver with good grades, and being a member of certain organizations.  

Homeowners Insurance

Again, there are many factors that impact homeowners insurance.  Here are some common ones: 

1. Location 

Where you live is one of the biggest factors that can determine the cost of home insurance.  Areas that are at risk due to natural disasters generally have higher insurance premiums.  Local factors within states also affect costs, such as being urban/rural, in a high-crime area, or being near a reliable fire department.  

2. Rebuilding Costs

A higher-priced home generally costs more to insure because the rebuilding costs can be more expensive.  

Read our blog, Two Out of Three American Homes Are Under Insured: Don't Be One of Them, to get more information and view an informative video.  

3. Home Age and Condition

Older homes often have features and construction materials that are harder/more costly to replace, like ornate trim.  Plumbing and electrical systems could also be outdated, perceived as being higher risk, and therefore premiums may increase.

4. Home Security

Some insurers take into account safety systems in your home.  If you have them, you may earn discounts.

5. Credit Score

Like auto insurance, some insurance companies take into account the way you use credit.  Having a good credit score is often perceived as being lower risk, and rates are adjusted accordingly.  

What can you do? 

Review different carriers.  Consider making updates to your home, like installing a new roof or adding security.  Talk to your insurance agent and see what they think!

So, why is insurance so expensive?

Insurance is an important purchase to make sure you and your family are protected in unexpected circumstances.  Selecting the right type and amount of insurance will be based on your specific situation, with many varying factors playing a key role.  

Insurance isn’t necessarily expensive; insurers just take into account the likelihood that a situation will occur where the insurance policy will come into play, and they give you a quote based on their findings.  

Don’t fear.  You’re paying for a service that can save you the worry and hassle in the case of a negative, unprecedented event.  

Contact us today to talk to an agent who can help you find what you need.