How Much Does Car Insurance Cost?
Recent data released by the National Association of Insurance Commissioners (NAIC) revealed that in 2017 (the latest data available), the average national cost for a basic car insurance policy was $1,054 per year. Since 2010, this figure has gone up an average of 2.23% a year, so following this trend, we could estimate that average costs in 2019 might be around $1,100.
The NAIC study based their figures on policies including bodily injury, property damage, comprehensive, and collision coverage—the 4 components considered to be the basis of an auto insurance plan. However, not everyone has these levels of coverage, and what's more, a number of personal considerations play a large part in your premiums. Factors such as your age, location, driving record, and even the type of car you drive help insurers determine your risk of filing a claim. The higher your risk, the more you'll pay.
Given so many factors, there's no easy answer when it comes to how much car insurance costs. The best way for you to make sure you get the right coverage at the best price is to first understand the basic requirements and how your personal circumstances will affect you. Once you have a better idea of the groundwork, you can search for ways to lower your rate.
Basic Auto Insurance Requirements
Virtually all U.S. states have minimum requirements for car insurance. Though the laws vary state by state, in most cases you can expect to need some level of coverage to protect you against any possible damage you cause to others and their property. These types of insurance include:
- Bodily injury (BI) liability per person
- Bodily injury liability per incident
- Property damage (PD) liability per incident
Beyond these, many states also require additional types of insurance that cover injuries to yourself and your passengers. These often include:
- Personal injury protection (PIP)
- Uninsured/underinsured motorist liability per person
- Uninsured/underinsured motorist liability per incident
The exact amount of coverage you need also varies by state. For example, most states require around $25,000 of BI per person, while others only mandate $15,000 and some go up to $50,000. Your premiums will likely be more expensive in states that have higher or more complex requirements.
Additional Coverage Options
The minimum levels of insurance might be just fine for you, or you might want additional coverage. The add-ons available can be especially useful if it's you, your passengers, or your property, that get hurt or damaged.
Including add-ons in your plan will increase the cost of your premiums but will likely save you a significant amount of money if you end up needing the benefits.
Optional insurance coverage includes:
Personal Factors That Impact Your Rate
The types and amounts of coverage you have will certainly impact your premium, but by far the largest part of what you pay comes down to your personal characteristics. Because insurers determine risk based on factors that are unique to you, you'll likely pay a different premium than a person with the same plan, from the same company, in the same state. While some states don't allow specific demographic information to be used in setting rates, most companies use a combination of factors to assess your risk.
Ways to Lower the Cost of Car Insurance
Car insurance can be pricey, but you can take proactive steps to help reduce the cost of your premiums. While you can't change information like your age, gender, or driving history, you can work toward lower rates with other cost-saving strategies.
Once you've satisfied your state requirements, it's up to you to determine what types of add-on coverage is worth the investment. Consider the following tips when deciding what to cut and what to keep:
- Purchase enough liability insurance as you can afford to cover your assets, (savings, investments, and any homes or vehicles you own)
- Maintain comprehensive and other types of insurance required for car loans or lease agreements
- Cancel collision and comprehensive insurance if your car isn't worth paying the deductible to repair or replace it after an accident
- Choose the highest deductible within your means to lower your monthly premiums
- Don't skimp on uninsured/underinsured insurance since it's relatively inexpensive and will help with medical bills if needed
Most car insurance companies offer discounts for driving safely and having personal characteristics that reduce your risk of making a claim. You might qualify for more than a single discount, though most companies limit your combined reductions to 25% of the total policy price. Some common discounts include the following:
- Affiliation discount for being associated with a specific group or organization
- Auto-pay/paperless discount for establishing automatic payments and opting out of paper bills
- Defensive driver training discount for completing an approved educational course
- Full payment/early signing discount for paying your entire policy upfront or renewing before your current policy expires
- Good student discount for high school or college students who meet specific grade criteria
- Low mileage discount for driving fewer than the average number of miles per year
- Loyalty/multi-policy discount for purchasing home, life, or other policies in addition to auto insurance from the same company
- Safe driver discount for avoiding moving violations and accidents
- Safety device discount for having a vehicle equipped with factory-installed airbags, anti-theft devices, or other required equipment
- Student living away discount for students living more than 100 miles away from home without regular use of a vehicle
To make sure you're getting the best rate, it's recommended to request quotes from at least 3 different auto insurance companies for the same type of policy. It's also important to review your rates each year. Make sure your insurance company knows about any significant changes, especially those that can reduce your premiums. Improving your credit score, removing someone from your policy, or selling a vehicle are events that can all reduce the cost of auto insurance.