How much is car insurance going to cost you? It’s not an easy question to answer. The quote you receive could be painfully high or comfortably low based on a number of different factors. But for what it’s worth, the average amount spent to insure a car in the U.S. was $815 a year in 2012, according to the National Association of Insurance Commissioners.
However, as anyone who pays much less — or more — than $815 a year can tell you, there are a lot of variables that affect your car insurance rates.
Some factors, including where you live and what kind of car you drive, can be tough to change. Others, such as your driving habits and the level of coverage you choose, are a bit easier to tweak. I’ll break down these factors and discuss what (if anything) you can do to save a dime on your car insurance.
Comparison Shop to Lower Your Car Insurance Cost
Before we get started, it’s important to mention one thing you can always do to save some money: Shop around. It’s easiest to start online. Our quote generator below can help you do that quickly, eliminating the hassle of calling individual insurers and repeating the same information. Just enter your ZIP code and you’re on your way:
Find the Best Car Insurance Rates
Enter your ZIP code below and be sure to click at least 2-3 companies to find the very best rate.
Cost Factor No. 1: Basic Demographics
Your age, sex, marital status, and location all weigh heavily on how much you car insurance costs. That’s because your insurance company has an enormous amount of data that tells them how each of these things makes you more or less of a risk for filing claims.
For instance, if you’re younger (typically, age 25 or below), unmarried, and male, you’ll pay more than an older, married female, who is statistically less likely to file a claim.
Location also has a huge impact on your car insurance rates. State laws that regulate car insurance can have a big effect. Michigan, the most expensive state for car insurance premiums according to Insure.com, tops the list because residents get unlimited lifetime personal injury protection for medical expenses resulting from crashes. Montana comes in second, in part because crash fatality rates are very high, and insurers think driver safety laws are too lax.
You’ll also almost always pay more in densely populated areas, where you’re at more risk for an accident. This is likely why Washington, D.C., Connecticut, Rhode Island, and New Jersey are all among the top 10 most expensive states. Areas prone to natural disasters can mean car insurance costs a premium, too, which is why Louisiana is fourth on the list.
How to save: Unfortunately, this is the toughest category for eking out some savings. You’re unlikely to move or get married just to save on how much car insurance costs.
Still, it’s worth at least keeping in mind how big an impact where you live can have on what you pay. According to CarInsurance.com, even ZIP codes that aren’t terribly far from one another can vary dramatically on average costs. For more details on how costs vary from state to state, keep reading.
How much is car insurance? A state-by-state breakdown
Below, you’ll see how the cost of car insurance varies by state, according to two measures. The first number is the average expenditure per state, drawn from 2012 data from the National Association of Insurance Commissioners. This figure is the total amount collected in each state for liability, comprehensive, and collision premiums, divided by the total number of insured vehicles.
The second number compares the average premium for similar coverage across every state and Washington, D.C., according to a 2015 study by Insure.com. The study averaged quotes for a full-coverage policy for the same customer driving 20 of the best-selling cars in 10 ZIP codes per state.
As you’ll see, just because a state has a high average expenditure doesn’t necessarily mean it has a high average premium (and vice versa). Remember that the first number takes into account how much customers actually choose to spend — they may opt out of pricier coverage options or choose lower coverage limits — whereas the second number is simply an average of quotes for a policy that includes everything.
Cost Factor No. 2: The Car You Drive
You probably didn’t think about how your car would affect your insurance rates when you bought it, and you probably won’t trade it in just because of your rate. However, just as your insurance company assumes you’re a bigger or smaller risk based on your own demographics, it assigns risk based on the car you drive, too.
How to save: When it’s time to shop for a car, keep this rule of thumb in mind: The faster the car can go, the bigger the risk of a crash, and the more you’ll pay.
If you drive a sensible family car such as a minivan, sedan, or SUV, you probably won’t pay nearly as much as someone who drives a pricey, high-performance sports car. In a recent analysis, the Nissan GT-R Nismo, Mercedes-Benz SL65 AMG Convertible, Dodge SRT Viper, Porsche 911 Carrera S Cabriolet, and Audi R8 5.2 Spyder Quattro were the most expensive to insure. On the flip side, the Jeep Wrangler Sport, Jeep Patriot Sport, Honda CR-V, Dodge Grand Caravan, and Honda Odyssey were easiest on the wallet.
You can also save a bit of money by considering a used car, which will almost always be cheaper to insure than a new one. Anti-theft devices such as alarms, anti-lock brakes, and other safety-focused equipment can also save you some cash.
Cost Factor No. 3: Your Driving History
This one is probably the most obvious factor affecting your car insurance, and it may seem like the fairest one. The more tickets and violations you have, the higher your rates are going to climb. Some tickets will be worse than others: For instance, if you’re cited for DUI or reckless driving, your insurance premium could nearly double, according to Bankrate.
Speeding or running a red light will still raise your rates, but much less. In fact, your insurer may not raise your rates after one speeding ticket. The increase you see may also partially depend on how fast you were going. The average bump is 21% if you were caught going up to 15 mph over the speed limit, but that rises to 30% if you were flooring it at 31 mph or more over the limit.
How to save: You can’t rewrite the past, but you can be a safer driver going forward. If your insurer offers one, you can even consider installing a tracker that records data on driving habits such as mileage, sudden acceleration or deceleration, excessive speed, rough turns, and whether you drive a lot at night. Typically, you won’t be penalized for bad driving, but you could be rewarded for good driving. You may also be able to save by taking a defensive driving course.
Cost Factor No. 4: Your Credit Score
If you’re wondering what your credit score has to do with how much you pay for car insurance, it’s a good question. Insurers cite an abundance of data showing the higher your credit score, the less likely you are to file a claim. The reverse is also true: If your credit score is poor, you’re at a greater risk for filing a claim. This controversial practice is actually illegal in a few states (California, Hawaii, and Massachusetts), but otherwise, it’s fair game.
How to save: There’s no quick fix for bad credit, but raising your credit score is still enormously worthwhile because it affects far more than what you pay for car insurance. Paying your bills on time for an extended period is one of the best things to do for your credit score. Reducing large balances and being judicious about opening new credit accounts can also help. For more on what your credit score affects and how to raise it, check out our article, What is a Good Credit Score?
Cost Factor No. 5: Your Driving Habits
Your driving habits make up your daily driving routine. Do you commute daily via car, and for how long? Do you ever use your car for business purposes? Does your car gather dust until the weekend because you use public transportation during the week? Do you park on the street, in a shared lot, or in your own private garage?
All of these things add up to paint a picture of your risk of getting into a crash. Accordingly, they can affect your car insurance premium.
How to save: It sounds obvious, but the less you drive, the less of a risk you are for your insurance company. Moving closer to work to reduce your mileage, taking public transportation, or carpooling are a few tactics that can save you a lot of money — just be sure to report any such chances to your insurer so that you can reap the benefits.
Cost Factor No. 6: The Amount of Coverage You Choose
When you’re shopping for car insurance, there are a couple of numbers that will weigh heavily on what you pay. The first is your limits — that is, the maximum amount your insurance company will pay in the event of a claim. Limits are usually written like this: $50,000/$100,000. That means your insurer will pay up to $50,000 per person and $100,000 per accident.
The second number to know is your deductible. That’s how much you’ll pay out of your own pocket when you make a claim. A common deductible is $500, but they can go as low as around $100 and as high as $1,000 to $2,000.
How to save: You don’t want to overpay for coverage you don’t need, but you also don’t want to skimp and leave yourself on the hook for thousands after an accident.
You’ll be required to have a certain minimum limit depending on where you live. For instance, as a Tennessee resident, I’m required to have at least $25,000 per person and $50,000 per accident in bodily injury liability coverage as well as $15,000 in property damage liability coverage.
However, just because you are only legally required to have a certain amount of coverage doesn’t mean it’s a good idea to carry only the minimum, even if that will save you money. That’s because you could lose your assets, such as your savings or even your house, if someone’s medical or property damage bills exceed your ability to pay when you’re at fault.
That means if you have significant assets, you’ll want to protect them with more coverage. Experts often recommend $100,000 per person and $300,000 per accident as a minimum.
Your deductible can be a better place to save. Agreeing to pay $1,000 instead of $100 in the event of a claim can save you a lot of money — but it’s a tactic you should only use if you have that $1,000 stashed away in your emergency fund, ready to pay that bill should you need it.
Cost Factor No. 7: The Type of Coverage You Choose
The types of coverage I discussed above — bodily injury liability and property damage liability — are required when you buy car insurance. There are some other types of coverage that you may be able to skip, however.
How to save: Instead of blindly paying for every kind of coverage, carefully evaluate whether they make sense for your individual situation.
For instance, personal injury protection (PIP) isn’t required in all states. It helps pay for your or your family’s medical bills after a crash. However, it’s probably not necessary if you and your family have adequate health insurance. It also doesn’t make sense to pay for roadside assistance if you’re already a member of AAA.
Comprehensive and collision coverage will be required if you’re financing or leasing your car, but are optional if that’s not the case. Comprehensive covers damage to your vehicle from car theft, vandalism, and other calamities that don’t involve actual crashes. Collision coverage is similar to comprehensive coverage, but covers actual crash-related damage to your vehicle.
If you’re not required to have comprehensive or collision, it might make sense to drop this pricey coverage if you drive very infrequently or if your car’s value is very low.
How Much Does Car Insurance Cost? A Lot — If You Don’t Shop Around
Remember that one of the best things you can do to save on car insurance has nothing to do with who you are, where you live, the coverage you select, or how you drive. Instead, it’s simple comparison shopping: You should always look around to make sure you get the best deal, since each company places a slightly different emphasis on the factors I outlined above.
One other critical reason to shop around is that different insurers offer different discounts. Some will offer you a break for being a good student, a member of certain organizations, active-duty military, or for bundling other policies such as home insurance with the same company. That’s on top of common price breaks for driving less, driving a low-risk car, or having a good credit score, among the other factors I discussed in this article.
Online quote tools can be particularly helpful as you start your search. However, remember that the quicker the quote, the more information you’ll have to provide further down the line. Given how many variables affect how much car insurance costs, you’ll eventually have to provide a fair amount of personal information to get the most accurate price. Good luck!
Idaho, Indiana, Iowa, Kansas, Maine, Minnesota, Montana, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Dakota, Vermont, Wisconsin, and Wyoming.
Why these are the most affordable states
Favorable weather: Most of these states aren’t coastal, which means you’re not as susceptible to catastrophic weather such as hurricanes. Plus, these are non-desert states, which means chipped/cracked glass claims aren’t as common. Glass claims are usually caused by debris/rocks being kicked up cars, and that happens more frequently in dry, desert states.
Small population density: Fewer drivers leads to less congested roads, lower traffic, and ultimately fewer accidents.
Low crime rates: For vandalism and car thefts, these states generally rank lower than medium and high-cost states.
Lack of dangerous intersections: Insurance companies track data on particularly dangerous intersections, such as five- and six-way stops, really busy intersections, etc. These states tend to have fewer, which means fewer accidents.
Insurance requirements are minimal: So we pass the savings on to drivers.
Average monthly price: $167
Total six-month policy average: $999
Alaska, Arizona, Alabama, Arkansas, Hawaii, Illinois, Kentucky, Mississippi, Missouri, Nebraska, Nevada, Oregon, Tennessee, Utah, Virginia, Washington, and West Virginia.
Why these states rank in the middle per cost
Fairly favorable weather: Most states in this group aren’t coastal, so you’re not susceptible to catastrophic weather. But, desert and other dry states may be prone to glass damage from debris/rocks being kicked up by cars.
Fairly populated: These states fall in the middle in terms of population, which means they also fall in the middle for traffic and accidents.
Medium crime rates: For vandalism and car thefts, these states generally rank lower than high-cost states but higher than low-cost states.
Fewer dangerous intersections: Compared to high cost states, most states ranking in the middle per cost don’t have as many risky intersections—which means fewer accidents.
Some insurance requirements by state law: These aren’t the most regulated states, but may have more mandates that could increase insurance prices compared to low-cost states.
Average monthly price: $232
Total six-month policy average: $1,379
California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Louisiana, Maryland, Massachusetts, Michigan, Pennsylvania, New Jersey, New York, Rhode Island, South Carolina, and Texas.
Why these are the most expensive states
Dense population: More drivers mean more accidents.
Severe weather issues: Earthquakes, floods, and hurricanes are more common, as many of these states are coastal. Plus, many of these non-coastal states are more prone to hail, which leads to more claims.
Higher crime rates: Theft and vandalism are more common in this group of states than medium- and lower-priced states, which results in more claims.
More dangerous intersections: Busy five- and six-way stops are likely to cause more accidents.
More stringent insurance requirements by state laws: Many of these states have highly regulated insurance laws or more complex coverage requirements. That means higher prices.
We looked at data from CarInsurance.com and a handful of states’ Departments of Insurance data and saw that annual premiums are on the rise in most US states. The average cost of insurance for automobile owners has generally risen, Arkansas, Georgia, North Carolina, and Virginia being the exceptions. These quotes for car insurance in select states in the US will give you a good estimate for the annual average cost of car insurance.
Is the minimum liability coverage in a standard auto policy enough?
The minimum coverage required by law varies depending on the state you live in. It’s not all you should have, however. The overall cost of an accident can exceed the liability limits on a driver’s policy. When that happens, the driver’s personal assets are exposed, and can be seized in a lawsuit to pay for the rest of the claim.
Patti Clement, First Vice President of HUB International in New York, NY, said, “Make sure that you purchase the appropriate liability coverage, not the minimum available. If there is an accident, and you have split limits and do not have good coverage, you will be out of pocket, whatever the damages are, over and above those limits for bodily injury and property damage.”
How much liability coverage do I need on my car insurance policy?
“I urge prospective clients to buy as much liability coverage as they can reasonably afford, preferably in excess of your total assets and then some,” advised Kristofer Kirchen, President of
First Florida Insurance Network of Central Florida. “The reason is that regardless of what your assets are, you have no control over who gets injured or the extent of that injury.”
Is there additional room in your budget to accommodate more coverage? It is rather impossible to foresee what accidents may happen, and how much exposure you’ll have. It is however, straightforward to cap that exposure at the total value of your assets with some room for growth. Tally the value of your house, automobiles, investments, retirement accounts, banking accounts, and other property with a buffer.
At the very least, motorists are required by law to carry the statutory liability protection or proof of financial responsibility (in certain states). “If pressed by someone who cannot afford more, I would say that they should get at least 25/50/25, but I reiterate that people should buy as much as they can afford,” recommends Kirchen.
If you’re interested in looking up what the minimum coverage requirements are in your particular state, look no further. In the table below you’ll see three numbers listed in the «Coverage Requirements» section. The first two numbers represent the bodily injury liability requirements and the third number references property damage. For example, in Alabama $25,000/50,000/25,000 means that the insurance company will cover each person involved in an accident up to $25,000 each or $50,000 per accident. Additionally, the insurer will cover up to $25,000 (the third number) for any property damage you cause.
Example of Insurance Payouts for Liability Claims
To illustrate the concept of sufficient liability coverage, let’s use a hypothetical example of an accident in New Jersey. The minimum liability coverage in the Garden State is 15/30/5: $15,000 per person for bodily injury, $30,000 max payout for the accident, and $5,000 of payout for property damaged by the accident.
Let’s say a driver crashes into another vehicle with two passengers on a busy intersection. The driver and passenger in the second car are seriously injured, and their car is heavily damaged. Third party claims are submitted for:
$25,000 for the driver, $10,000 for the passenger for the ambulance, emergency care, and other medical costs
$6,000 to fix structural damage to the body of the car
Your insurer pays the maximum out under your standard policy for $15,000 in bodily injury liability for the driver, $10,000 for the passenger’s medical expenses, and $5,000 under the property damage portion of your policy. The excess costs not covered by your policy are:
$10,000 for additional medical care for the driver, and
$1,000 for the vehicle repair
The other party has recourse to go after the rest of your assets to pay for the leftover balance. “If you do not have the appropriate limits, the balance from your coverage is deducted and you will have to pay that out of pocket — even garnishing your wages or income for the rest of your life,” cautioned Clement.
How Property Damage and Bodily Injury Liability Work
Property Damage from an insurance company such as Allstate will cover the repair and parts replacement costs of damage to homes, storefronts, vehicles, and other stationary objects. As you can imagine, the cost of repairing or getting original equipment manufacturer parts can be very different depending on whether it’s a $10,000 car or a $100,000 car.
Bodily Injury liability will pay out for medical care, emergency services, compensation of lost income, and even funeral expenses. Claims made under this liability are affected by a number of variable factors, which as Kirchen explains, can range widely:
The skill level of the injured third party:
Is the other driver a minimum wage employee or a highly skilled neurosurgeon? Bodily Injury Liability compensates the other party for lost income.
The type of injury sustained by the other driver:
Were there minor bruises and scratches, a debilitating head injury, or a loss of limb or nerve damage? An accident can potentially impact someone’s livelihood and earning power. “There is a big difference between bumps and bruises and a head injury or loss of limb or nerve damage in a hand,” explains Kirchen, “all of which can severely hinder the aforementioned neurosurgeon’s practice.”
The age of the injured person:
A young professional still has many years of significant earning power ahead that the accident impacted, while an older person may be getting ready to retire, and therefore won’t experience much loss of income.
What’s an Umbrella policy, and should I add it to my car insurance?
A personal umbrella policy pays for damages above and beyond the maximum payouts on your auto insurance policy. Excess liability protection is usually in the form of combined single limits, which doesn’t set aside a set amount for bodily injury or property damage that the standard auto policy does. Coverage starts at $1MM, and can be augmented in increments of a million.
The best part about an umbrella policy is its return on incremental premium. Adding an umbrella premium can cost a few hundred dollars a year – a dollar a day, estimates Allstate – but you’ll get a $1MM shield for your assets. If you can afford it, and you have the assets to protect, an umbrella policy is recommended.
In order to qualify, you are typically required to have the maximum under the split limit policies. For example, at GEICO, your auto insurance has to max out at $300,000 for bodily injury, and $100,000 of property damage. Other insurers may have different requirements.
Examples of the coverage under an Umbrella policy
The primary auto policy can only do so much in a multiple vehicle collision. “Most people do not realize that if they get into an accident and hit multiple cars or injure multiple people there is a cap on the primary auto policy. That is why is recommended to have an umbrella policy that sits over and above these limits,” says Clement.
Loss of Income:
If an accident causes a neurosurgeon to be out of commission for six months, you may be at risk for her loss of income. According to the 2012 MGMA Physician Compensation Report, a surgeon makes on average $775,968 a year. For those six months she spent recuperating, her foregone salary totaled $387,984. The foregone salary alone would have cleared out your maximum policy with $88,000 out-of-pocket, assuming you had the highest level of protection from GEICO, and without factoring in the cost of medical care.