How Much Do Car Insurance Cost

Car insurance is an essential financial protection for drivers, guarding against liability from damage and injuries caused in an auto accident. While car insurance is mandatory in most states, costs can vary widely based on your age, driving record, location, type of vehicle, and other factors. Learning more about the key determinants of car insurance rates can help drivers make informed choices to find the best coverage at the lowest price

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Average Cost of Car Insurance

Nationwide, drivers pay an average of $815 a year for minimum liability coverage and $1,548 annually for full coverage insurance, according to 2021 rate data from Quadrant Information Services. However, these average figures disguise wide variations in insurance costs based on individual risk factors.

Factors That Impact Car Insurance Rates

Car insurance companies set rates based on the likelihood you’ll file a claim. Several main factors determine your risk profile:

• Age — Teenage drivers pay the highest rates due to lack of experience. Rates start falling around age 25 when drivers are less risky.
• Driving record — Drivers with accidents, speeding tickets, or DUIs pay more for covering their higher risk. Just one at-fault accident can increase rates by 30% on average.
• Location — Insurance costs reflect local claims frequencies and repair costs. Urban areas tend to have higher rates.
• Mileage — Drivers who rack up high mileage have more exposure to accidents. Car insurance costs per mile are lower for those who drive less than 7,500 miles annually.
• Credit score — Statistics show drivers with poor credit tend to file more claims. Insurers in most states use credit-based insurance scores to set rates.
• Vehicle — Insuring a new luxury car costs more than an old economy car due to higher repair costs and theft risk.
• Coverage limits — Higher liability and collision coverage limits add cost but provide more protection.
• Deductibles — Choosing a higher deductible saves on premiums at the cost of paying more out-of-pocket on claims.

Insurers weigh these factors using sophisticated pricing algorithms and models to project future losses and set rates accordingly. Let’s look closer at how some key factors drive cost differences.

Age Differences in Car Insurance Rates

Age is one of the biggest determinants of what drivers pay for coverage. Teenage drivers face extremely high car insurance rates due to lack of experience behind the wheel.

• 16-year-old drivers pay average annual premiums of $3,400, triple the average across all ages.
• 17–18 year old drivers also pay very elevated rates, around $2,800 on average.
• By the mid-20s, insurance rates drop significantly as drivers gain experience and exhibit less risky behavior.
• Average rates bottom out around ages 30–55, as little as $800–1,200 per year.
• After age 65, rates start to creep up again due to higher accident rates.

Insurers commonly require a young driver fee or surcharge for teens and college students, on top of the higher base rate for their age group. With a teen on the policy, some companies limit discounts normally available to adult drivers in the household.

Driving Record Effects on Insurance Costs

Drivers with clean records pay significantly less for car insurance compared to motorists with moving violations, at-fault accidents, or serious infractions like DUI.

• A single at-fault accident can increase insurance rates by 47% on average, while two accidents within three years can nearly double rates.
• Speeding tickets hike car insurance costs 22% on average. Multiple tickets compound the rate spike.
• A first-time DUI conviction causes rates to rise 130% on average due to the high risk of repeat offenses.

To compensate for the elevated claim risk, insurers charge higher premiums based on negative marks on your driving record. The impact is greatest right after the incident and diminishes over time if no further violations occur. Maintaining a clean driving record is a proven way to save hundreds per year on car insurance premiums.

Middle-Aged Drivers Pay Least for Car Insurance

Looking at average insurance rates across different age groups reveals an interesting trend. While teens and young drivers pay the most, the cheapest rates are found not among the oldest drivers but those in the middle-age ranges.

Data from 2021 shows the average annual car insurance rate is:

• Age 16 — $3,387
• Age 22 — $1,592
• Age 35 — $1,009
• Age 60 — $1,059
• Age 70 — $1,335

Drivers in their 50s and early 60s tend to pay the least for car insurance. Accident rates start rising again after age 70, increasing average premiums for older drivers. Middle-age drivers have years of experience but don’t face the higher risks of elderly drivers. Less time on the road also helps reduce their claim exposure.

Comparing Monthly Payment Options

Most car insurance companies bill policyholders once every 6 months, but they may offer installment plans to split the payments into smaller monthly bills. Opting for monthly installments does not alter the overall annual premium. However, a service fee is usually added to each payment to compensate the insurer for the administrative costs of more frequent billing cycles.

For example, a semi-annual premium of $600 would commonly be divided into 9 monthly payments of around $70 each with a $5 service charge per installment. Drivers who prefer easier budgeting with monthly bills should compare any fees and ask their insurer if billing frequency affects available discounts.

Required vs. Optional Car Insurance Coverage

Auto insurance policies are divided into required and optional coverage categories. Liability insurance is mandatory in nearly every state, while collision, comprehensive and other coverages are optional add-ons.

Liability Auto Insurance

The minimum liability coverage required by most states includes:

• Bodily injury liability — covers injuries to others caused by an at-fault accident, up to the limits chosen.
• Property damage liability — pays for damage to another vehicle or property, up to selected limits.

Required minimum liability limits range from 15/30/5 to 25/50/25, indicating:

• $15,000 to $25,000 bodily injury per person
• $30,000 to $50,000 bodily injury per accident
• $5,000 to $25,000 property damage

Higher 100/300/100 limits provide more protection and may be recommended for drivers with significant assets at risk. Liability insurance helps guard your finances but does not pay for your own vehicle damage or medical bills.

Optional Coverages

Other main types of car insurance are optional, including:

• Collision — pays to repair your vehicle after an accident regardless of fault, subject to the deductible.
• Comprehensive — covers non-collision damage from theft, vandalism, weather, fire, animals, projectiles, and other causes, minus the deductible.
• Uninsured/underinsured motorist (UM/UIM) — protects against injury costs when an at-fault driver has inadequate or no liability insurance.
• Medical payments (MedPay) — covers medical treatment for the policyholder and passengers without determining fault.
• Personal injury protection (PIP) — pays medical costs and sometimes lost wages after an accident up to policy limits, no-fault.

Choosing optional coverages brings higher premiums but can be worth the cost for added financial protection. Analyzing needs based on your car’s value, medical costs, and risk tolerance helps determine appropriate extra coverage.

Ways to Reduce Car Insurance Costs

With average rates topping $1,500 a year, it pays to shop around and maximize savings opportunities. Here are some proven ways drivers can cut costs on their auto insurance:

Compare Quotes From Multiple Insurers

Rates for the same driver can vary 30% or more between different insurance companies. Shopping and comparing quotes ensures you find the carrier offering the best price. Quote comparison sites make this easy by providing a single application form that accesses rates from multiple insurers. Comparing quotes every renewal cycle also catches any better deals from new rate adjustments.

Ask About All Available Discounts

Most insurers offer common discounts like:

• Safe driver — for a clean record, typically 3 years with no accidents or violations
• Good student — maintains a B average or higher
• Defensive driver — completes an approved safe driving course
• Multiple car — insures two or more cars on the same policy
• Multiple policy — holds home or other insurance with the same provider

Other potential discounts include:

• Paid in full — pays full 6-month or annual premium upfront rather than in installments
• Early shopper — gets quote well before renewal date
• Paperless — opts into electronic statements and online management
• Loyalty — remains insured with the company for several consecutive years

Asking about every possible discount can help you maximize savings each renewal period. Promptly reporting lifestyle changes like adding safety features, moving closer to work, or driving less miles also may earn premium reductions.

Raise Deductibles to Lower Premiums

Deductibles represent what you pay out-of-pocket on a claim before insurance coverage kicks in. Choosing higher deductibles reduces premiums but increases your upfront costs if you need to file a claim.

Going from a $500 deductible to $1,000 could lower collision and comprehensive coverage premiums 25% or more. Before raising deductibles, have enough savings to absorb the higher costs in the event of an accident or damage.

Drop Optional Coverages If Costs Outweigh Benefits

Removing optional coverages like collision, comprehensive, rental reimbursement, and roadside assistance can yield significant premium savings. However, you lose the protection these coverages provide.

Carefully consider if potential benefits justify the cost of optional insurance based on factors like:

• Car value — Dropping collision/comprehensive on an older low-value car may make sense
• Emergency fund — Can you afford out-of-pocket repairs or rental costs without reimbursement coverage?
• Risk tolerance — Are you comfortable assuming more costs in a worst-case scenario to reduce premiums?

Improving credit score, moving to a safer area, purchasing a lower-profile vehicle, and other big changes may also open doors to premium reductions.

Maintaining Good Credit Saves on Car Insurance

Credit-based insurance scores have a major influence on auto insurance rates for most drivers. Statistics show that people with poor credit tend to file more claims. As a result, insurers use credit information to project risk levels incorporated into your premiums.

• Drivers with poor credit pay $1,673 on average for car insurance.
• Good credit lowers average annual premiums to $1,027.

Paying bills on time, limiting credit inquiries, lowering debt, and otherwise improving your credit profile can pay big dividends by unlocking the lowest insurance rates. Some steps like getting reporting errors corrected can produce a quick boost to credit scores.

Comparing Car Insurance Rates by State

Auto insurance costs vary widely across the U.S. based on each state’s unique regulations, traffic conditions, density of urban areas, likelihood of natural disasters, and other local factors. Looking at nationwide data reveals large cost differences among states.

The most expensive states for car insurance are:

StateAverage Annual PremiumMichigan$2,738Louisiana$2,699Florida$2,560Kentucky$2,049Nevada$1,979

At the other end, annual premiums are about half as much in these cheapest states:

StateAverage Annual PremiumMaine$864New Hampshire$867Ohio$893Idaho$942Virginia$963

Factors like mandatory minimum liability limits, uninsured motorist coverage requirements, auto theft rates, traffic density, and weather risks contribute to the wide cost gaps between states.

Getting an Accurate Car Insurance Rate Estimate

Since many factors affect individual premiums, getting an accurate rate quote requires providing detailed information on:

• Personal details — age, marital status, address, education, occupation
• Driving record — past accidents, speeding tickets, license revocations
• Car details — year, make, model, vehicle identification number, safety features
• Coverage types and limits
• Mileage — typical annual and commute mileage
• Prior insurance history — previous carrier, coverage, gaps in insurance
• Discounts — teenage driver, safe driver, low mileage

Insurers use this data along with credit-based insurance scores and other proprietary rating factors to predict future claim likelihood and price policies accordingly. Providing accurate details ensures you receive the correct rate for your risk profile.

Comparing personalized quotes from multiple carriers remains the best way to get a precise rate estimate tailored to your situation. Online insurance marketplaces simplify shopping among top national and local insurance providers.

Conclusion

The wide range of average car insurance costs demonstrates the dramatic impact personal factors have on what drivers pay for coverage. Teenage and young drivers face steep rates due to limited experience, while middle-aged drivers enjoy the lowest premiums until accident risks start rising again after age 70. Excellent credit and a clean driving record offer the fastest ways to reduce insurance costs. Comparing quotes, maximizing discounts, and choosing optimal deductibles also produces major savings. While rates vary widely by state and individual, the average cost of car insurance is over $1,500 a year for minimum liability and nearly $2,600 for full coverage.

FAQs

How much does the average car insurance cost per year?

The average cost of car insurance per year varies depending on several factors, including the driver’s age, driving history, location, and the type of car being insured. According to Bankrate, the average cost of car insurance in the United States is $1,674 per year.

What factors have the biggest impact on car insurance costs?

Several factors can impact car insurance costs, including the driver’s age, driving history, location, and the type of car being insured. Other factors that can affect car insurance costs include the level of coverage, the deductible amount, and the insurance company’s underwriting practices.

What is the difference between required and optional auto insurance coverage?

Required auto insurance coverage is the minimum amount of coverage required by law in a particular state or jurisdiction. This typically includes liability coverage, which covers damages or injuries caused by the insured driver to other people or property. Optional auto insurance coverage includes additional types of coverage that are not required by law, such as collision coverage, comprehensive coverage, and personal injury protection (PIP).

How can I get the cheapest car insurance rates possible?

To get the cheapest car insurance rates possible, it is recommended to shop around and compare quotes from multiple insurance companies. Other ways to potentially lower car insurance costs include raising the deductible, reducing coverage levels, taking advantage of discounts, and maintaining a good driving record.

Is it recommended to get quotes from multiple insurance companies?

Yes, it is recommended to get quotes from multiple insurance companies to compare rates and coverage options. This can help you find the best deal and potentially save money on car insurance premiums.

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