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Car insurance costs an average of $1,765 per year, according to a 2023 report by AAA. That said, the cost of your insurance premium is determined by several factors, so it may be higher or lower than average. Here's what you should know about how much car insurance costs and what can impact your policy premiums.
How Much Does Car Insurance Cost?
The cost of a policy that sets you back $1,765 per year breaks down to about $147 per month, though car insurers tend to offer discounts if you pay your policy premium in full instead of in monthly increments.
The average is based on a full coverage policy for someone under the age of 65 with more than six years of driving experience, no accidents and who lives in the city or suburbs. Depending on where you live, how long you've been driving, how much you drive, your age and gender and several other factors, the premium you're charged may be very different.
Full Coverage vs. Minimum Coverage
Nearly every state requires that you maintain a minimum amount of liability insurance, which provides protection for injuries and property damage you may cause in an accident. Depending on where you live, you may need to also have other types of coverage, such as:
- Uninsured motorist coverage: This protects you if you get in an accident, and the at-fault driver doesn't have insurance coverage or their coverage amount is insufficient.
- Personal injury protection: Required in no-fault states, this coverage may help with medical payments, lost wages, funeral costs and certain other expenses.
- Medical payments coverage: This helps cover the cost of medical injuries sustained by you, your family and other passengers in your vehicle. It's only required in Maine.
Full coverage goes above and beyond what your state requires, adding two key coverages:
- Collision coverage: It covers the cost of repairing or replacing your vehicle if you cause a collision with another vehicle or a stationary object.
- Comprehensive coverage: This covers the cost of repairing or replacing your vehicle if it is stolen or sustains damage due to vandalism, fire, collision with an animal, weather and other events that are outside of your control.
You can expect a full coverage policy to cost more than a policy that simply meets the legally required minimum. While collision and comprehensive coverages are never required by state law, you'll likely be required to maintain full coverage if you have an outstanding loan on your vehicle. Even if you don't, it can still make sense if you can't afford the loss of your vehicle in an accident.
Factors That Affect Car Insurance Rates
There are several primary elements insurance companies look at when deciding your premium when you apply for a car insurance quote.
Where You Live
Drivers who live in a major city are more at risk of vandalism, theft and accidents, so they can expect to pay more than rural drivers. Rates can also vary depending on the cost of repairs and medical care, weather trends and other factors that can vary by state and area.
Driving Record
Tickets and other violations can spike your car insurance rate because they're a sign that you may be a risky driver.
Accidents, primarily when you're at fault, can also cause your premium rates to balloon. In some cases, you can see a rate increase after an accident even if you were not at fault for the accident but still filed a claim.
Vehicle Type and Use
The type of car you drive is a key consideration for insurers. For example, cars that are statistically more likely to be stolen may carry higher rates than others that are further down the list. Additionally, higher-priced cars are more expensive to insure because they cost more to repair.
If you have a daily commute, you'll likely pay more than someone who works from home or only drives their vehicle for pleasure.
Demographics
Insurance companies can't discriminate based on race or religion, but your age, gender and marital status can all impact how much you pay. Teenagers and single males tend to get in more accidents, so they usually pay more than women and married couples.
Type and Amount of Coverage
The more types of coverage you have, the more you can expect to pay. In addition to the coverage options detailed above, some insurers offer additional coverage types, such as rental car reimbursement and emergency roadside assistance.
The amount of coverage you have will also impact your premium, along with your deductible for collision and comprehensive insurance. A higher deductible can result in a lower premium, but you'll want to make sure you can afford the out-of-pocket cost in the event of a claim.
Credit History
In states where it's allowed, auto insurers also may use what's called a credit-based insurance score to help determine your rate. That's because credit scores can help predict the likelihood that you'll file a claim.
Keep in mind, though, that insurers can't consider your credit history in California, Hawaii, Massachusetts or Michigan. Even in states where it is allowed, insurers typically can't use your score as the sole reason to raise your rate, deny you coverage or cancel or refuse to renew your policy.
Other Factors
While not as prominent in the decision, there are several other factors that an insurance company may consider when determining your rate, including:
- Occupation
- Housing situation
- Previous insurance coverage (specifically, whether there's been a gap in coverage)
- Driving experience
- Discount eligibility
How to Save Money on Car Insurance
Now that you understand what goes into the decision-making process for car insurance, here are some tips to help you qualify for a lower rate:
- Shop around. One of the best things you can do to score a low rate is to shop around and compare quotes from several insurers. This process could save you hundreds or even thousands of dollars, depending on where you live.
- Ask about discounts. Insurers offer discounts as an incentive to buy a policy. There are generally discounts available based on your driving habits, your demographics, the vehicle's safety technology and how you plan to use the vehicle.
- Bundle your policies. If you own more than one vehicle, own a home or are renting, getting all of your insurance policies from the same company can help you save money. Those savings could be as high as 30%.
- Adjust your coverage. Dropping optional add-ons, reducing coverage amounts and increasing your deductible can help you reduce your rate. Just keep in mind that this approach can come back to bite you if you get in an accident and don't have sufficient coverage.
- Improve your credit score. If your credit isn't in great shape, look for ways to improve it before you buy a policy. You can get your free credit score and credit report through Experian. Look for areas that need work, focusing on some of the more significant factors that go into your credit score, such as account balances.
Frequently Asked Questions
Because there are so many factors that go into determining auto insurance rates, it's hard to pinpoint a broad group of drivers who pay the least. That said, drivers in their late 60s and early 70s typically pay the least on average.
Additionally, married couples, people who live in rural areas, drive infrequently and have clean driving records can usually expect lower rates.
Insurers look at a variety of vehicle factors when determining rates, including market value, repair costs, safety features, theft statistics and the frequency of bodily injury claims. According to Progressive, some of the models that are cheapest to insure include:
- Chevrolet Bolt
- Mini Cooper
- Subaru Ascent
- Honda Passport
- Subaru Forester
- Toyota RAV4
- Toyota Tacoma
- Honda Ridgeline
Insurance rates are strictly regulated by state agencies, so they're not negotiable. That said, you're not obligated to stay with your current carrier, even if you're in the middle of your policy period. The best way to lower your rate without reducing your coverage is to switch to a carrier that offers a less expensive policy.
Review Car Insurance Rates Regularly
Car insurance rates are never set in stone, and the factors that determine yours can change over time. While you may get extra benefits for being loyal to your local grocery store, favorite airline or retailer, that's not always the case with car insurers.
As such, it may be a good idea to check in on your car insurance rate every year or two. Consider shopping around a bit to make sure you still have the lowest rate possible. If not, it may be worth switching to take advantage of lower costs elsewhere. With the Experian auto insurance comparison tool, you can compare personalized quotes from multiple carriers in one place.