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How Much Does Car Insurance Cost?

trophy car that costs a lot for insurance

Recent data released by the National Association of Insurance Commissioners (NAIC) revealed that in 2015 (the latest data available), the average national cost for a basic car insurance policy was $1,009 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 bases 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:

This helps pay for the repair or replacement of your vehicle if you get into an accident with a car or another object. This insurance isn't state-mandated but is typically required if you're leasing or financing your car.

Comprehensive insurance covers damage caused by non-collision events like extreme weather, natural disasters, falling objects, vandalism, and theft.

This plan is there to help cover medical expenses or funeral costs if you or your passengers get hurt, or if you're hit by a car while walking, running, or biking.

If the amount you own on a car loan or lease is greater than what your insurance will reimburse for damage or theft, then gap insurance can help make up the difference.  

Roadside assistance comes in handy when you've run out of gas, your engine stalls, you need a tire changed or any of the other mechanical failures that could happen with your car. It can also cover fees for towing to get your car to the repair shop.

If something happens to your car, rental reimbursement can get you back on the road quickly if your car is stuck in repairs.

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.

Age is one of the biggest factors in determining your car insurance rates, and without a doubt, teen drivers cost the most to insure.

In a national study, Consumer Reports found that adding a teen driver to a family auto insurance policy increased premiums by an average of 90%.

Rates can begin to fall dramatically in your mid-20s and decline by more than 50% by age 30. After this point, premiums typically continue to go down for a few decades, but reverse once you're into your 60s. Age-related conditions, such as impaired vision or arthritis, can make premiums slowly rise with each additional year you're insured.

Your gender can also affect your auto insurance rates, with women frequently paying less than men. According to Money Under 30, men have been shown to have a higher risk of being involved in serious traffic violations, as well as engaging in dangerous behaviors such as drunk driving. They're also more likely to own cars that are considered risky, such as high-performance sports cars. This rate gap is the largest for male drivers between the ages of 16 and 24, where teen and young adult men pay about 15% higher premiums than females.

Not only do the minimum requirements of your state impact what you'll pay for insurance, but other state-related factors come into play as well. Things such as population, weather patterns, infrastructure, and cost of living can make your premiums higher or lower.

Per the NAIC study, the 10 states with the lowest average rates include:

  • Idaho
  • Indiana
  • Iowa
  • Maine
  • New Hampshire
  • North Carolina
  • North Dakota
  • Ohio
  • Vermont
  • Wisconsin

The 10 locations with the highest average rates are:

  • Connecticut
  • Delaware
  • Florida
  • Louisiana
  • Massachusetts
  • Michigan
  • New Jersey
  • New York
  • Rhode Island
  • Washington, D.C.

Exactly where you live in your state is also a factor. Drivers who live in areas where more accidents, theft, and vandalism occur usually pay higher rates. This located-based pricing is largely defined by ZIP code, so 2 people with similar personal factors could pay very different rates, even if they only live miles apart.

Many car insurance companies consider marital status a factor in setting rates. Single, separated, and divorced drivers typically pay higher rates than married drivers at all ages. The Consumer Federation of America (CFA) reports that newly widowed women receive rate increases that average 20% after their husbands die.

Some insurance companies say married people deserve lower rates because they tend to drive more safely, but there's little-to-no data to back this up. The CFA questions the fairness of using marital status as a factor in determining premiums and has called on state insurance departments to examining their pricing policies more carefully.

Many companies consider your credit and insurance scores in setting your rate. Your credit report predicts the likelihood that you'll pay your bill, while your insurance score predicts the likelihood that you'll have losses. Depending on your financial history, these scores can affect your insurance rate either positively or negatively. If you're rejected for insurance because of these scores, you'll likely need to pursue a high-risk policy, which can come with even larger fees.

A good driving record almost ensures that you'll pay lower rates. Serious traffic violations, especially DUIs, can have a big impact on your auto insurance costs.

The national median increase in premiums after a DUI is nearly twice the original price, though this varies widely depending on the state, the company, and your personal factors.

In some cases, you could see an increase in premiums of 100% or even more. Some insurers might refuse to renew your policy after a DUI, which will almost always make it even more expensive to get new coverage through a different company.

The more often you use your car, the higher chance you have of getting into an accident. If you drive your car less than the average of 12,000–15,000 miles in a year, you might be able to request lower premiums since you're at a reduced risk. Some insurance companies even make mileage the primary factor in determining rates, varying your premium based on how much you drive each month.

Higher-priced, luxury cars might require more expensive repairs if damaged, while bigger engines and sporty designs could encourage unsafe driving and cause more accidents. Driving a car in either of these categories could increase your rates, however having certain safety equipment could help offset rate hikes related to design.

There are also certain models of cars that have a higher likelihood of theft and therefore come with larger rates. If your vehicle's on the National Insurance Crime Bureau's yearly Hot Wheels Report, you should expect to see higher premiums if you have comprehensive coverage. These cars include:

  • Honda Civic
  • Honda Accord
  • Ford Pickup
  • Chevrolet Pickup
  • Toyota Camry
  • Nissan Altima
  • Toyota Corolla
  • Dodge Pickup
  • GMC Pickup
  • Chevrolet Impala

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.

Reduce coverage

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

Seek discounts

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

Compare rates

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.

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