To drive legally, almost all drivers are required to have a minimum level of insurance coverage, while there is no set cost that every driver must pay. The amount of your auto insurance rates is determined by a variety of criteria by car insurance providers. These variables include the kind of car you drive, your driving history, your claim history, and the state in which you reside. Depending on the auto insurance laws in your state, other variables could also include your age, gender, credit score, and ZIP code. When evaluating vehicle insurance renewals and comparing auto insurance quotes, it might be helpful to be aware of the elements that affect your cost of car insurance.
Key conclusions
- Car insurance prices are influenced by a number of variables, including the sort of vehicle you drive, its safety record, and any prior claims.
- Your choice of coverage, the kind of car you drive, and how frequently you drive all have an impact.
- Saving money on auto insurance can be achieved by looking into discounts, bundling plans, and only making claims when absolutely required.
What aspects influence the cost of vehicle insurance?
To provide you with an estimate for auto insurance, your insurer will need to know a number of details. To make the process of looking around easier, you can typically prepare information about yourself, your car, and your insurance history in advance.
Credit rating
Your credit score affects more than just your ability to get a car loan; it might also have an impact on your ability to get auto insurance. Insurance firms may use what is referred to as an insurance-based credit score even though they do not directly use your credit score. However, several states, including California, Hawaii, and Massachusetts, forbid the use of your credit score when determining the cost of your auto insurance.
If you’re wondering why your credit score is so crucial, it’s because it’s used to forecast behavior in the future. According to Cynthia Moore of Salzburg Insurance in Norfolk, Virginia, “Credit has been employed in the insurance market since the 1990s to help carriers assess the risk of claims being submitted.” According to studies, persons with lower credit scores are statistically more likely to submit more claims than those with higher credit scores, she said. As a result, insurers may raise the premium to account for the increased risk.
Location
In most places, every element of your location—from your state to your city and even down to your ZIP code—could affect the amount of your premium. According to John Espenschied of Insurance Brokers Group, LLC, a significant impact is the state in which your car is garaged or parked. He cautions that state rates might differ by as much as 400%, with Louisiana having one of the highest in the US. Espenschied demonstrates that the requirement for personal injury protection (PIP) coverage in twelve states dramatically raises the price of auto insurance. These states, which are referred to as no-fault states, mandate that your insurance provider cover any bodily injury you get in the event of an accident, regardless of who was at blame.
Moore claims that the population density indicated by your garaging ZIP code can affect the chance of thefts and accidents. However, it’s crucial to be aware that, in California and Michigan, auto insurance providers are not permitted to use your ZIP code or a number of other non-driving criteria to set your premiums.
Due to associated loss causes, people who live in places with severe weather may also have to pay higher premiums. For instance, according to the NICB, Hurricane Harvey caused damage to more than 422,000 insured automobiles, Hurricane Katrina caused nearly 300,000 claims, and Superstorm Sandy caused 250,500 claims.
| State | Average annual full coverage premium | Average annual minimum coverage premium |
|---|---|---|
| Alabama | $1,760 | $443 |
| Alaska | $1,770 | $417 |
| Arizona | $1,743 | $579 |
| Arkansas | $1,806 | $437 |
| California | $2,190 | $619 |
| Colorado | $2,019 | $495 |
| Connecticut | $1,533 | $646 |
| Delaware | $1,963 | $747 |
| Florida | $2,762 | $997 |
| Georgia | $1,985 | $630 |
| Hawaii | $1,206 | $338 |
| Idaho | $1,065 | $271 |
| Illinois | $1,548 | $477 |
| Indiana | $1,242 | $329 |
| Iowa | $1,254 | $227 |
| Kansas | $1,802 | $419 |
| Kentucky | $1,954 | $658 |
| Louisiana | $2,864 | $807 |
| Maine | $876 | $227 |
| Maryland | $1,931 | $836 |
| Massachusetts | $1,296 | $446 |
| Michigan | $2,345 | $946 |
| Minnesota | $1,692 | $600 |
| Mississippi | $1,701 | $450 |
| Missouri | $1,861 | $504 |
| Montana | $1,795 | $310 |
| Nebraska | $1,538 | $367 |
| Nevada | $2,426 | $846 |
| New Hampshire | $1,182 | $324 |
| New Jersey | $1,891 | $855 |
| New Mexico | $1,489 | $347 |
| New York | $2,996 | $1,339 |
| North Carolina | $1,392 | $431 |
| North Dakota | $1,225 | $268 |
| Ohio | $1,200 | $336 |
| Oklahoma | $1,902 | $408 |
| Oregon | $1,371 | $625 |
| Pennsylvania | $2,002 | $441 |
| Rhode Island | $1,847 | $569 |
| South Carolina | $1,464 | $518 |
| South Dakota | $1,542 | $274 |
| Tennessee | $1,383 | $372 |
| Texas | $1,868 | $551 |
| Utah | $1,449 | $544 |
| Vermont | $1,000 | $242 |
| Virginia | $1,340 | $475 |
| Washington | $1,313 | $482 |
| Washington, D.C. | $1,948 | $613 |
| West Virginia | $1,527 | $427 |
| Wisconsin | $1,249 | $364 |
| Wyoming | $1,510 | $262 |
Earlier coverage
Your auto insurance prices are impacted by your insurance history in two different ways. According to Espenschied of Insurance Brokers Group, having prior insurance demonstrates that you have consistently maintained insurance, which is necessary in all states except New Hampshire. “People who choose to drive without insurance but later decide to get insurance have a considerably higher risk of canceling,” he said. “This is especially true if the policy was only obtained to renew license plates or to appear in court as proof of insurance.” Espenschied explained that if you have five or more years with a single insurance provider, you would often be eligible for cheaper prices. It demonstrates tenacity and a willingness to maintain insurance over time.
The lapse in your coverage, though, can work against you. You could have to pay more to the insurance companies to cover the increased risk.
Driver’s license
Even if you have a lengthy insurance history, reckless driving practices can raise your prices. If you have accidents on your driving record, insurance companies may see you as a high-risk customer and raise your rates. In contrast, those with spotless driving histories may find lower rates more quickly and be eligible for additional discounts, like safe driver and claims-free discounts.
Gender and age
In most jurisdictions, your age alone will determine how much you pay for auto insurance throughout your lifetime. According to the IIHS, teen drivers are involved in four times as many accidents as drivers age 20 or older. Due to inexperience and dangerous practices, this frequently occurs. On the opposite end of the spectrum, the Institute notes that drivers beyond the age of 70 experience more crashes than those in their middle years, though still less than those in their twenties.
In many places, gender is taken into account when determining auto insurance prices.
Especially for those under 25, men often pay greater premiums than women, according to Moore of Salzburg Insurance. Rates remain flat between 30 and 65, after which most carriers start to raise rates for drivers over 65, particularly over 75. Moore said that research indicates older drivers have a shorter reaction time and poorer vision, which leads to more claims, when asked why.
California, Hawaii, Massachusetts, Michigan, North Carolina, and Pennsylvania are the states that do not take into account a person’s gender when setting their premiums.
Vehicle
Although you might anticipate that a new car would cost more to insure than an older one, it is not always that straightforward. Because they have newer parts, newer cars are often more expensive to insure. However, if your new vehicle qualifies for additional discounts, such as for having safety features, it can cost less to insure than a vehicle from a previous generation.
Size additionally contributes to newness. Knowing the type and model of a car might help you predict what kind of auto insurance rates to expect.
How to reduce the cost of your insurance
There are additional ways to reduce your auto insurance price and save money on your policy despite rate considerations.
- Inquire about discounts: Many insurance providers provide a variety of auto insurance discounts for things like no claims, loyalty, and full payment.
- Combining your insurance would probably result in lower prices for both when you have your house and car insurance policies with the same provider. Other insurance policies, such as those for a condo, yacht, life, and health, could also be bundled.
- Increase your deductible: This strategy can be useful, according to Drew Scott, senior vice president of Scott Insurance in Stratford, Connecticut, but if you want to save a lot of money, you might want to choose a higher deductible for numerous vehicles. Remember that even though your monthly premium will be smaller, if you are in an accident, your out-of-pocket costs would be higher.
- Espenschied recommends against submitting or contacting your insurance about minor, unimportant claims. Espenschied argued that all claims, including those with no financial payout, require time, money, and effort to examine.
- Espenschied advised filing a claim with the other driver’s insurance company before contacting your own in the event that someone damages your vehicle. Chances are, the other party will agree to pay you immediately for a minor claim so that it won’t appear on their record when the contract is up for renewal.
- Add safety features: You can think about having adaptive headlights, anti-theft gadgets, blind spot detection, rearview cameras, or anti-lock brakes added in your car if it doesn’t already have them in order to save money. For safety measures, several insurance companies give discounts. The increased security may also lower your risk of an accident.
- Compare prices: It could benefit to shop around for auto insurance at least once a year to make sure you are receiving the best price for your coverage, whether you currently have a policy in place or your policy is about to expire. Ahead of the renewal date of your insurance, you might find that switching carriers will result in lower prices for you.
A lot of people have questions
How do greater state-mandated liability limitations impact the cost of auto insurance?
The cheapest vehicle insurance premiums can come from carrying only the minimum liability limits allowed by your state, but the real cost might put your finances at serious risk. This is due to the fact that you would be responsible for covering the excess out of pocket if you are found to be at fault in an accident and the damages exceed your vehicle insurance limits. Higher liability limits and optional coverage like collision and comprehensive may cost more up front, but they may end up saving you more money overall.
Can your annual mileage affect how much you pay for car insurance?
Your auto insurance prices may vary depending on how frequently you drive and how far you drive it each year. If a driver meets certain eligibility requirements, they may be eligible for low-mileage or limited use savings.
What impact does marriage have on auto insurance rates?
Marriage may affect your premiums because you will probably add your spouse to your insurance once you get hitched. Although your specific scenario will mostly determine whether your rate goes up or down, certain insurers do provide reductions that married policyholders might be able to take advantage of, such multi-car discounts for insuring more than one vehicle.
Methodology
In order to assess rates for all carriers and ZIP codes in all 50 states and Washington, D.C., Bankrate uses Quadrant Information Services. Based on the population density of each geographical area, rates are weighted. A 40-year-old male and female driver with a spotless driving record, good credit, and the following full coverage limits is used to calculate the quoted rates:
- bodily injury liability of $100,000 per person
- $300,000 in responsibility for each accident’s injuries
- $50,000 in responsibility for property damage per incident
- Uninsured motorist bodily harm per person at $100,000
- Uninsured motorist bodily harm per accident: $300,000.
- $500 deductible for collision
- $500 for a full deductible
- Bankrate utilized minimal coverage that complies with each state’s laws to determine minimum coverage limits. Our typical drivers commute five days a week, log 12,000 miles a year, and drive a 2020 Toyota Camry.
Only use these rates for comparison purposes since they are sample rates.
Credit: The following insurance credit tiers were used to determine rates for our drivers: “poor, moderate, good (base), and exceptional.” Your official credit scores are taken into account when determining your insurance credit levels, but they are not the only determinant. California, Hawaii, Massachusetts, and Michigan are the states that forbid credit scores from influencing vehicle insurance premiums.
Scores for insurance based on credit: The following insurance credit tiers were used to determine rates for our drivers: “poor, moderate, good (base), and exceptional.” Your official credit scores are taken into account when determining your insurance credit levels, but they are not the only determinant. California, Hawaii, Massachusetts, and Michigan are the only four jurisdictions that forbid the use of credit-based insurance scores as a rating component in setting auto insurance prices.
Incident: Rates were determined by taking into account the following incidents to our base profile: lapse in coverage, single DUI conviction, single speeding ticket, at-fault accident, and clean record (base).
Mileage: To determine rates, our base profile was examined with the following variations in mileage: 2k, 5k, 12k (base), 15k, and 20k.
Model: We examined our base profile with the following vehicles applied: BMW 330i, Ford F-150, Honda Odyssey, Toyota Prius, and Toyota Camry in order to determine cost by vehicle type (base). We also included the following years in our estimates for new vs. used cars: 2016, 2017, 2018, 2019 (base), and 2020.
Status: Based on the marital/family statuses of single (base), married, and 40-year married man and woman with a 16-year-old teen driver, rates were examined.
Age: Rates were determined by assessing our base profile while applying the ages 18 to 60 (base: 40 years). Drivers can either be renters or homeowners depending on their age. Rates from Hawaii and Massachusetts show that age is not a determining factor.
Gender: California, Hawaii, Massachusetts, Michigan, North Carolina, and Pennsylvania do not take gender into account for deciding premiums.
Adding a 16 or 17-year-old teen to a 40-year-old married couple’s insurance resulted in rates for teenagers. The prices shown account for the higher premium for the parents’ coverage.
