If you need car insurance, you may be wondering how much car insurance costs. If you already have car insurance, and you're considering switching carriers, you may be wondering if you're paying a fair, competitive rate.
The short answer to this question: the cost of car insurance varies greatly based on many individual factors.
There is no one-size-fits-all approach to car insurance or blanket statement of how much car insurance costs. You can compare quotes to get a sense of how much a policy might cost, but be aware that in addition to the variables that are used to determine your rates, each driver has individual needs and coverages which will affect their premiums.
Location, Personal Profile, & Vehicle
Insurance is based upon risk models, which is assigned to each potential policyholder and used to determine premiums. While each carrier may be different in the products they offer and how they assign risk to applicants, generally, they all consider common factors.
Where you live plays a major role in what you'll pay. If you live in an area that has a high population density, then the greater your risk for being involved in an auto accident. If you live in an area that has a high rate of auto theft, you're more likely to file a comprehensive claim. If you live in an area that's known for inclement weather or natural disasters, you're likely to pay more as residents in those areas are more likely to file claims.
Additionally, each state has their own minimums for how much coverage you'll need to purchase. Depending on your state, the minimum amounts of coverage you're required to purchase will affect your yearly premiums. For example, in New Hampshire (with a few exceptions) auto insurance isn't required and there is no minimum amount to purchase. Just south of the New Hampshire border, in Massachusetts, the minimum liability amounts are $20,000 for bodily injury per person, $40,000 per accident, and $5,000 total property damage per accident.
The National Average
According to the Insurance Information Institute (iii), the average national expenditure for auto insurance in 2014 (the last year this data is available) was $866.31 per year. To put this in better perspective regarding how location affects premiums, in 2014, New Jersey had the highest average premiums at $1,237 per year, while Vermont was the lowest at $665.17 per year.
As mentioned above, your annual premiums will vary on what types of optional coverages you purchase. According to the iii, 78 percent of insured drivers purchase comprehensive, and 73 percent purchase collision insurance.
Premiums rates will also reflect the amount of liability coverage purchased (both minimums and additional coverage). It's recommended that you purchase enough coverage to protect your assets. You'll want to research how much car insurance you need to make an informed decision on what coverages are appropriate for you.
Discounts will influence your rates as well. You might want to look into discounts such as safe driver discounts, low-mileage, or bundling together multiple policies with your auto such as homeowners, renters, and life insurance. Not all carriers are the same and offer the same discounts, so it helps to shop around and see if there's any that might be applicable to you.
Factors such as your age, gender, driving history, and credit score will all play a role in determining your premiums. Younger drivers tend to represent a higher risk factor and can expect to pay more. Subsequently, once you hit the age of 65, you can expect a raise in premiums. Men typically pay more for car insurance than women. If you have a history of at-fault accidents, you can expect to pay a higher premium than someone who doesn't. If you have a history of traffic violations, you can expect to pay more. And with the exception of drivers in Massachusetts, California, and Hawaii, even your credit score can play a role in determining your rates.
The type of vehicle you drive is factored into your rates. The make and model will typically matter more than the calendar year of your car. If you're insuring a sports car rather than a sedan, you can expect to pay higher rates as a sports car has a higher risk factor. Often stolen vehicles, like Camrys, Accords, and F-Series pickups could result in a bump in premium as these vehicles represent a greater likelihood to file a theft claim. Vehicles that have safety features may result in reduced premiums as they help reduce the risk and severity of injuries. If a car is deemed a total loss, the cost of replacing a fully loaded Cadillac is greater than replacing a bare-bones Hyundai. The point is, each make and model has nuances that will affect how your premium is determined, so keep this in mind when you're shopping around for car insurance.
As we've seen, these are the most common factors that will come into play when auto insurance carriers are setting your rates. No two carriers are the same, and even the same carrier will differ from state to state. They have their own philosophies in terms of risk factors and the products they offer, so it's helpful to compare rates and speak with independent agents who are familiar with your region's carriers and products. Insurance experts recommend comparing rates every 6 to 12 months with at least 6 to 10 carriers to find the best prices.