The $5,000 car insurance bill

By Lucy Lazarony

Nothing worries an auto insurance company like young, urban hipsters driving congested city streets.

In some places, $5,000 yearly premiums aren't shocking -- they're the norm. Take Matt Ney of Arlington, Va., whose ticket-infested driving record resulted in a yearly bill of $4,000 until he turned 25.

His ride: An Audi? A 350Z? A shiny new BMW? Nope. It's a 2000 Honda Civic, bought used. His monthly payments were just $100.

"It's been very frustrating," said Ney.

In Detroit, Los Angeles and Philadelphia, the numbers are even scarier. An 18-year-old man living in southwest Detroit could be charged as much as $13,138 a year to insure a 1999 Ford Ranger pickup. And that's with no tickets or accidents on his record.

And then there's this headline-grabbing example from Canada, where an Alberta teen with 10 tickets, two fender benders and a totaled car got a renewal notice for $104,566.33.

Even though auto insurance rates have stabilized in the past couple of years, drivers that insurance companies consider to be higher-risk -- such as young, urban drivers with imperfect driving records -- can expect to pay thousands and thousands of dollars for even basic coverage.

"You easily pay more than the value of the car for coverage required by the state," says Robert Hunter, the director of insurance for the Consumer Federation of America.

It's no mystery

Drivers under age 25 are involved in more accidents than any other age group, and car crashes remain the leading killer of people ages 15 to 20.

"They're risk takers by nature," says Loretta Worters, a vice president of the Insurance Information Institute. "They don't have the experience on the road. They don't have the maturity level."

And amid these accident-prone younger drivers, it's the male drivers who tend to cause more of the accidents. Insurance companies know this.

That's what happened to Ney. "I had an inordinate number of tickets. I probably logged in about eight over 10 years," Ney said. "It's held me back in terms of other expenses. You know that payment is coming, so you are not apt to go on a vacation or out for a weekend of some sort."

Now 26, Ney's insurance has dropped to $2,300 a year, still nearly double what his yearly car payments had been. He's driving much more slowly these days and hasn't gotten a ticket in three years. That's the length of time it takes for his record to be wiped clean and his insurance to drop from a "high-risk driver."

He plans to buy a new car when his insurance costs drop and his new fitness company for children, called Fit4Fun, begins to make money.

Why city dwellers pay more

Auto insurance rates tend to be higher in cities than in rural areas because of the higher density of traffic, increased likelihood of theft and vandalism, and greater incidence of fraud. These risk factors vary from city to city and even from neighborhood to neighborhood.

The average cost for yearly auto insurance premiums for American drivers is $829, according to the Insurance Information Institute. But many urban drivers are likely to pay much more than that, especially drivers living in Detroit, Philadelphia and Los Angeles.

In Detroit, the average yearly auto insurance premium is $5,072, according to Runzheimer International. Drivers in Philadelphia pay an average of $3,779; in Newark, N.J., $3,381. And drivers in Los Angeles pay an average of $3,027.

Younger, inexperienced drivers living in these cities pay hundreds if not thousands of dollars more for insurance coverage. Throw in some speeding tickets or an accident or two, and premiums climb even higher.

Even opting for bare-bones insurance coverage -- the minimum coverage required by state law -- can be incredibly expensive for a young urban driver with a violation or two on his record.

Consider an example from the California Department of Insurance: A male driver with less than five years' driving experience, one ticket and one at-fault accident, living in central Los Angeles, would find premiums as much as $8,200 for mandated liability coverage. For full coverage, the same driver could may more than $15,000.

Even with a perfect driving record, this same driver could be charged as much as $3,776 for the minimum auto insurance required by the state.

Continued: Tips for cheaper coverage

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