What is the average cost of car insurance and are you paying too much?

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What is the average cost of car insurance and are you paying too much?

A deep dive into the average cost of car insurance across the United States.

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What is the average cost of car insurance and are you paying too much?

There’s no doubt that some budget categories are more exciting than others. Most of us would prefer to have larger amounts of money to allocate for things like entertainment, travel, and hobbies. Other budget categories, like insurance, aren’t very exciting.

Despite the fact that spending money on insurance may not be exciting, it’s a necessary expense. Not only is car insurance required by almost every state, but it also serves a vital purpose in protecting your personal assets in case of damage or liability.

Although you need car insurance, you probably want to find a good deal in order to avoid overpaying. The more you can save on car insurance, the more you’ll have for those other things that might be more exciting ways to use your money.

When you’re evaluating your options, it may be helpful to know the average cost of car insurance in order to have a frame of reference.

We’ll look at the average costs in this article, but keep in mind that insurance premiums will vary greatly depending on your situation. The most important details that impact rates are covered below.

If you’re looking to save money on car insurance, shopping around is an essential part of the process. The only way to know that you’re getting a great deal is to get quotes from several different companies.
Keep in mind that price is just one of the factors to consider. Customer service will be very important if you ever need to file a claim. Please see our list of the best car insurance companies to help with your evaluation process.

Average Annual Auto Insurance Premium in Each State:
Rank State Full Coverage Minimum Coverage Difference
1 Michigan $8,723 $5,282 $3,441
2 Rhode Island $3,847 $1,589 $2,258
3 Louisiana $3,525 $1,329 $2,196
4 Kentucky $3,418 $1,338 $2,079
5 Florida $3,370 $2,565 $805
6 Nevada $3,190 $1,295 $1,895
7 Colorado $3,164 $1,075 $2,089
8 New Jersey $3,013 $1,182 $1,831
9 Washington, DC $2,793 $1,260 $1,533
10 New York $2,752 $1,323 $1,429
11 Arizona $2,699 $980 $1,719
12 Oklahoma $2,659 $742 $1,916
13 (tie) Connecticut $2,619 $1,192 $1,428
13 (tie) Georgia $2,619 $1,114 $1,505
15 Texas $2,594 $890 $1,704
16 Missouri $2,584 $874 $1,710
17 Utah $2,538 $1,105 $1,433
18 Montana $2,525 $641 $1,884
19 Delaware $2,513 $1,316 $1,197
20 Maryland $2,431 $1,180 $1,251
21 South Dakota $2,338 $420 $1,917
22 Illinois $2,313 $878 $1,435
23 Minnesota $2,271 $983 $1,289
24 Arkansas $2,213 $677 $1,536
25 Mississippi $2,208 $749 $1,459
26 Oregon $2,205 $1,136 $1,070
27 New Mexico $2,194 $699 $1,495
28 Kansas $2,190 $654 $1,535
29 West Virginia $2,131 $685 $1,447
30 Wyoming $2,118 $485 $1,632
31 Alabama $2,078 $736 $1,342
32 Nebraska $2,038 $599 $1,439
33 Pennsylvania $2,018 $615 $1,403
34 South Carolina $2,013 $854 $1,158
35 New Hampshire $2,004 $643 $1,361
36 North Dakota $1,979 $528 $1,451
37 Massachusetts $1,866 $646 $1,219
38 Tennessee $1,821 $577 $1,243
39 California $1,804 $574 $1,230
40 Idaho $1,777 $606 $1,171
41 Vermont $1,769 $552 $1,217
42 Washington $1,691 $706 $985
43 Ohio $1,688 $561 $1,127
44 Wisconsin $1,590 $486 $1,104
45 Alaska $1,502 $485 $1,016
46 Virginia $1,498 $607 $891
47 Indiana $1,489 $498 $991
48 Iowa $1,482 $357 $1,124
49 North Carolina $1,434 $542 $865
50 Hawaii $1,340 $475 $865
51 Maine $1,268 $489 $779

Table data via Value Penguin

What Factors Influence the Cost of Car Insurance?

The cost of car insurance will vary from one person to the next. Looking at the average rates can be helpful, but your rates may be above or below the average based on a combination of many different factors.

Location

One of the biggest factors that will influence the cost of premiums is the area where you live. Coverage in urban areas can be significantly more expensive than the same coverage in rural areas.

This makes sense as accidents are more common in urban areas where traffic tends to be heavy. Theft is also usually higher in urban areas, so customers living in cities present a higher risk to the insurance company.

As you can see from the chart above, the average cost of car insurance by state varies significantly. However, not everyone in the state will pay the same rate. Rates will be influenced by the city or zip code where you live. A customer in rural New York will pay less than a customer in New York City (assuming all other details are equal). Don’t forget to consider this factor if you are looking at the average cost for your home state.

Age

The risk of a car accident is higher with 16-19-year-olds than any other age group (source). Young drivers have less experience and present a greater risk to insurance companies, so their rates are higher than older drivers.

Rates tend to decrease slowly as the driver ages, but the increased rates extend into the mid 20’s.

While young drivers with unblemished driving records will be faced with higher rates, the premiums can increase very significantly for young drivers who have had accidents.

Driving Record and History of Accidents

Your driving record and history is another major factor that will influence your insurance premiums. Rates will typically increase after an accident (or an at-fault accident), although some companies and specific policies include accident forgiveness under certain conditions.

Aside from just accidents, other records in your history can also play a big factor. Drivers with a history that include a DUI will face increased rates as a high-risk driver.

Deductible

When you’re selecting a policy, you’ll have the option to choose the deductible. The deductible is the amount that you must pay before the insurance coverage kicks in. For example, if you’re in an accident, the cost of the damage is $3,000, and your policy has a $500 deductible, you’ll pay $500 and the insurance company will cover $2,500.

Policies with lower deductibles will have higher monthly premiums, and policies with higher deductibles will have lower monthly premiums.

Since you’ll only be responsible for the deductible if a claim is filed, safe drivers may be able to save money by opting for a policy with a higher deductible.

Coverage Limits

Each car insurance policy will have specific coverage limits. Most states require drivers to have insurance for liability related to bodily injury and property damage, but the requirements vary depending on the state.

Insurance policies will sometimes carry labels like 50/100/50, which would mean that the policy includes:

  • $50,000 of coverage per person for bodily injury
  • $100,000 in total for bodily injury per accident
  • $50,000 of coverage for property damage per accident

Increasing the coverage limits will increase the monthly premiums, and lowering the coverage limits will lower the monthly premiums.

Opting for a policy that provides minimum coverage according to your state’s requirements will help you to get the lowest possible monthly premium, but it may not provide you with sufficient coverage if you’re in a serious accident.

Type of Car

Some vehicles are more expensive to insure than others. For example, sports cars, luxury vehicles, and electric cars are more expensive to insure. Sports cars have the capability of high speeds, which can present a greater risk. Luxury and electric vehicles may involve higher replacement and repair costs, plus luxury vehicles are a more significant target for theft.

Your Credit Score

Your credit report will be pulled during the process of applying for insurance, and your credit score can impact the rate that you’re charged. In fact, credit can be a significant factor. It’s possible that a bad driver with good credit could pay less than a good driver with bad credit.

Please see How to Build Credit When You Have None for a guide to establishing credit that will help you save money on car insurance.

The Number of Miles You Drive

The distance that you drive can also impact your rates, as those who drive more will be statistically more likely to be involved in an accident. Of course, this number can change, especially if you move or change jobs, so be sure that you notify your insurance company and update your policy if your habits change to involve less driving.

The Number of Cars and Drivers Covered by the Policy

When average rates are evaluated, those numbers are based on a single driver with one car. However, if you have a family, your car insurance policy will probably cover more than one driver and it may cover multiple vehicles.

Obviously, adding more drivers and more vehicles to the policy will impact the rates that you pay, but it also depends on the specific details of each person and each vehicle. Parents who include a teen driver on their policy may see a significant increase due to the fact that a young driver is now being covered as well.

Continuous Insurance

Insurance companies may look at your history to see if there have been any recent gaps in car insurance. If you have been continually and consistently covered, you may pay a lower rate than a driver who has had a gap in coverage.

Gender

Some states have laws that prevent insurance companies from using gender as a factor that influences insurance premiums, but most states do not. In states where it is allowed, most insurance companies will use gender as one determining factor, however, age will also play a role here.

Young males are typically charged slightly higher rates than young females, but that reverses with age and older females are typically charged higher premiums than older males.

Full Coverage vs. Minimum Coverage

Most insurance companies will offer policies that simply meet the state’s minimum requirements. These policies offer the lowest premiums because they also provide the lowest amount of coverage. The states require liability insurance so that drivers will be covered for damage or injury that they cause, up to a certain limit.

“Full coverage” is a term that may be used when referring to car insurance policies, but it’s not a term that you will see on the details of the policy. In addition to liability coverage, a full coverage policy will also include:

  • Comprehensive - covers damage by something other than an accident (for example, hail, flooding, vandalism, theft).
  • Collision - covers repairs or replacement cost for your car.
  • Uninsured motorist - provides coverage if you are hit by a driver who is uninsured.
  • Medical - covers medical expenses regardless of who is at fault for the accident.

In addition to those added types of coverage, a full coverage policy may cover higher amounts for liability as compared to a minimum coverage policy. Of course, a full coverage policy will come with a higher premium, but it will provide significantly greater coverage.

The type of policy that is right for you will depend on factors like the car that you drive and your financial situation. If you’re driving a new car or if you have a loan on the car, a full coverage policy is a good idea because you’ll be in a very bad situation if you’re in an accident without that coverage.

If your personal financial situation makes it possible to afford a full coverage policy, the higher monthly premium may be preferable to taking a risk with minimum coverage. The higher net worth and more assets you have, the greater your risk if you have a policy with minimum liability.

How Do I Get a Discount for My Car Insurance?

Insurance companies provide countless different ways to get discounts on your premiums and the specific discounts that are available will vary from one company to another. Be sure to ask your insurance company (or any company that you’re considering) about the discounts that are available. Comparing the starting price can be helpful, but it’s more accurate to look at the final price after discounts because that can significantly impact the amount that you’ll actually pay for the policy.

Some of the common discounts include:

  • Home and Auto - Companies that offer homeowners insurance and car insurance will often discount the rates if you bundle both policies.
  • Customer Loyalty - If you stay with the same insurance company for a few years, you may be eligible for a discount.
  • Safe Driver - Some companies may offer discounts for drivers who complete safety courses. Many companies are now using mobile apps to track driving habits and offer discounts to drivers that qualify.
  • Multi-Car - You may get a discounted rate for including more than one car on the same policy.
  • Good Student - Young drivers with good grades may qualify for discounts.
  • Membership - Some organizations and social clubs (even fraternities and sororities) have partnerships with insurance companies to offer discounts to their members.

While this covers a few of the most common discounts, be sure to ask your provider about available discounts to be sure that you’re getting the best price. You may also want to get quotes for other policies (like homeowner’s or life insurance) to see the impact that bundling could have on your total insurance expenses.

How to Find Cheap Car Insurance

As you’ve seen from the information covered in this article, there are a lot of factors that influence your rates, and some of those factors are outside of your control. If you want to find cheap car insurance, the best thing to do is shop around. Compare rates with several different companies, and be sure to check on the discounts that may be available. You might want to get quotes for other insurance policies too, especially homeowner’s insurance, which may allow you to get lower rates through multi-policy discounts.

Comparing rates is something that you can do every year if you want to ensure that you’re always getting a good rate. It’s especially important to do some comparison shopping after significant changes that may impact your rates (like getting married, moving, having an accident, etc.).

While it may not help immediately, you can also make an effort to help your chances of saving money in the future by maintaining a good credit score, driving safely, consistently maintaining your insurance, and avoiding vehicles that are expensive to insure when it comes time to purchase your next vehicle.

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