Why Is Car Insurance So Expensive In Arizona?

According to data from the Bureau of Labor Statistics, car insurance prices are increasing faster than any other service. In February 2024, the average price of full coverage auto insurance was 26% more than it was in February 2023.

Car insurance prices are going up across the country, and Arizona is experiencing the same trend. One source predicts that rates in Arizona will rise by 22% by the end of 2025.

The high cost of insurance is usually caused by several factors, making it hard for most people to fully understand. However, with over 20 years of experience in the insurance industry, I can offer some extra insight into this issue. Keep reading to find out why car insurance is so expensive in Arizona.

Unique Reasons Why Car Insurance In Arizona Is So High

The cost of Arizona car insurance can be attributed to the following reasons as noted below.

Severe Weather

In Arizona, extreme weather events such as wildfires, droughts, and floods are happening more frequently. These events lead to more claims for auto insurance companies, which are often costly and harder to predict. Because of this, insurers must raise their rates to cover the increased risk and higher costs associated with these unpredictable disasters. This helps them stay financially stable while managing the growing number of claims.

Uninsured Drivers

Most states require a minimum amount of insurance to drive legally, and Arizona is no exception. However, despite this requirement, 11.9% of all Arizona drivers are uninsured.

When uninsured drivers are involved in accidents, the cost of those claims is shared by everyone, leading to higher insurance premiums for all drivers. This situation makes it more expensive for people who do have coverage.

Auto Theft

Auto theft is a significant issue in Arizona, with certain areas of the state, like Phoenix, experiencing higher rates of vehicle theft. Hotspots for theft often include areas with high population density or places where cars are left unattended for long periods.

Factors such as the state’s warm climate and the popularity of certain vehicle models make them targets for thieves. Law enforcement works to combat this problem, but vehicle theft remains a concern for many Arizona residents.

Insurance Fraud

In 2021, Arizona saw a notable increase in fraudulent claims, with the National Insurance Crime Bureau (NICB) reporting that the state ranked among the top 10 in the U.S. for staged auto accidents and other fraudulent activities.

Insurance fraud significantly impacts car insurance rates by increasing the overall cost of coverage for all drivers. When individuals submit false claims, such as staging accidents, inflating repair costs, or misrepresenting damages, insurers end up paying out for fraudulent claims. To recover these losses, insurance companies raise premiums for everyone. The more frequent and costly the fraud, the higher the likelihood that premiums will increase.

Attorney Involvement

In Arizona, drivers are also increasingly turning to attorneys after accidents, which can drive up the cost of car insurance. The state’s legal environment still encourages more legal involvement in claims. When attorneys become involved in claims, they often lead to higher settlement payouts, which in turn increases the overall cost of insurance.

As insurance companies face larger claims and higher legal costs, they pass these expenses onto policyholders by raising premiums. This trend contributes to the rising cost of car insurance in Arizona, impacting drivers across the state.

Higher-Than-Average Highway Density

High traffic on highways increases the chances of accidents, which is a key factor insurers consider when setting car insurance rates. In Arizona, there are 10.3 million miles driven for every mile of highway, which means the roads are more congested. Because of this high traffic density, insurance companies often raise premiums to account for the increased risk of accidents.

Population Density

As of 2024, Arizona’s population is expected to reach 7,497,004, continuing a steady increase year after year. A growing population means more drivers on the road, which leads to higher traffic congestion and a greater risk of accidents. For instance, in 2020, Arizona saw around 967 fatal crashes, compared to 811 fatal crashes in 2015. This rise in accidents contributes to higher insurance costs, as insurers must cover more claims and higher payouts.

Insurance companies take these factors into account when setting rates, often raising premiums to cover the increased likelihood of claims. With more people living in Arizona and more vehicles on the road, insurance companies adjust their rates to manage the higher risk, making car insurance more expensive for everyone.

Healthcare Costs

Car insurance companies face the biggest challenges when covering claims related to medical bills, and the costs continue to rise. In Arizona, healthcare expenses go up by an average of 6.9% each year, which increases the overall cost of insurance. This puts pressure on insurers, who pass these rising costs onto policyholders in the form of higher premiums.

Factors Causing Your Car Insurance To Be So High

Several factors can impact the cost of your car insurance. Below are some of the most common ones that can affect your premium.

Insurance Company

Insurance companies play a major role in determining car insurance rates by assessing various factors related to risk. They evaluate your driving history, the type of car you drive, where you live, and other personal details to decide how likely you are to file a claim. Based on this information, insurers set your premium.

If you have a clean driving record, low-risk car, and live in a safe area, your rates may be lower. However, if you have a history of accidents, drive a high-risk vehicle, or live in a location with frequent accidents, your rates will likely be higher.

Coverage Type

The type of coverage you choose for your car insurance can significantly impact your rates in Arizona. Basic coverage, like liability insurance, is usually cheaper because it only covers damage to others if you’re at fault. However, if you opt for more comprehensive coverage, such as collision or comprehensive insurance, your premium will increase.

This is because these policies offer broader protection, covering your own vehicle in case of an accident, theft, or damage from events like storms.

Age

Age is a significant factor in determining car insurance rates, especially in Arizona. Younger drivers, particularly those under 25, often face higher premiums because they are considered higher-risk due to inexperience and a greater likelihood of being involved in accidents.

In contrast, drivers over 65 may also experience increased rates, as older drivers can be more prone to accidents due to factors like slower reaction times or health issues. However, as drivers age and gain more experience, their rates typically decrease.

Gender

In Arizona, gender is another factor that can influence the cost of car insurance. Typically, men tend to pay higher premiums than women because they are considered higher-risk drivers, often due to factors like driving habits and accident rates. However, in Arizona, men pay $1,181 while women pay $1,183.

Location

In Arizona, the location where you live plays a key role in determining your car insurance rates. Areas with higher traffic, higher crime rates, or more frequent accidents tend to have higher premiums. For example, urban areas like Phoenix or Tucson, which experience heavy traffic and a higher risk of accidents or theft, often lead to higher insurance costs. On the other hand, drivers in rural areas may pay lower rates due to less traffic and a lower likelihood of accidents.

Driving History

Your driving history is one of the most important factors affecting your car insurance rates in Arizona. In Arizona, traffic violations can cause your car insurance premiums to rise by as much as 28% for full coverage.

If you have a clean driving record with no accidents or traffic violations, you’re likely to receive lower premiums, as insurers view you as a lower risk. However, if you have a history of accidents, speeding tickets, or DUIs, your rates will likely increase.

Credit Score

In Arizona, as in many other states, insurers can use credit-based insurance scores to determine car insurance rates. Drivers with poor credit typically pay about 77% more annually for full coverage insurance compared to those with better credit.

Your Vehicle

The type of vehicle you drive plays a significant role in determining your car insurance rates in Arizona. Cars that are more expensive to repair or replace, such as luxury or sports vehicles, typically come with higher premiums due to the increased cost of parts and labor.

Similarly, vehicles with higher performance capabilities or a higher risk of theft, like certain models of trucks or SUVs, may also lead to higher insurance rates. On the other hand, cars with excellent safety features or a reputation for reliability may qualify for discounts.