Did you know the national average cost of car insurance is $1,342 for full coverage?1 (That works out to about $112 for your monthly car insurance bill).
but remember, that’s the average. Auto insurance costs vary widely depending on a lot of factors. So how do insurance companies calculate how much your car insurance costs? And more importantly, how do you figure out how much to budget for insurance?
don’t worry! We’ll walk you through all the factors that affect your insurance rates, plus how you can save without giving up the coverage you need.
- How much does car insurance cost?
- what determines the cost of my auto insurance?
- How much does car insurance cost for new drivers?
- How can I save money on car insurance?
- Age: Love that new car smell? so do we, but we don’t like the price of new car insurance. used cars cost less to insure because they are cheaper to repair or replace. So save your money and get a new car air freshener for your old vehicle.
- Package: Package refers to the set of features that come with your car, such as leather seats or a sunroof. luxury, sports, or special edition packages can push your car insurance up, while cars with a basic package tend to be cheaper to insure.
- Repair costs: Vehicles that are expensive to repair, such as diesel or hybrid trucks, may cost more to insure.
- Green or Safety Features: Anything that makes your car safer or greener could help lower your insurance rates. talk about a win-win!
- Modifications: Turbocharged engines, lift kits, and other custom parts can increase your rates because they change the value of the car and its performance on the road.
- risk factor: choosing a sports car as your daily driver? yes, higher rates. sports cars, convertibles, and motorcycles are at higher risk of causing an accident or being seriously injured in one.
- color: bright colors attract more attention from the police, which means you are more likely to receive traffic tickets that increase your rates.
- you owe money
- You don’t have enough savings to pay cash for a vehicle of similar value
- have enough cash to repair or replace your car
- your car is over 10 years old (most insurance companies won’t sell these coverages for older cars, because it’s not worth the risk to insure)
So if you’ve been wondering how much auto insurance costs, we’ve got the answer. But first, we need to explain the big picture behind how auto insurance companies calculate their prices.
Car insurance companies make money by charging you a monthly premium (also known as your bill). when they have to pay the costs of an accident, their premium goes up because they lost money. But if you’ve never filed a claim, your premium stays low because it’s less risky to insure.
That’s the big picture. but there are many smaller details involved. Things like where she lives, how long she’s been driving, and what her marital status is and how old he is all affect how much auto insurance companies charge you. because, for them, all those factors directly feed the risk of insuring it.
Here’s what it all boils down to: The lower the insurance company’s risk of you filing a claim, the lower your premium. And the riskier it is to insure (ie, the more likely you are to file a claim), you guessed it, the higher your premiums will be.
The good news is that if you know what the insurance company is looking for, you can do things to get a lower rate.
Let’s go over each factor that affects how auto insurance companies calculate premiums. there are some things you can change and some you can’t, but they all play a role.
age and gender
Young drivers (ages 14-25) pay the most for car insurance. Since they are more likely to make a rookie mistake that leads to an accident, they are considered high risk. Drivers ages 25-60 get cheaper fares because they are (generally) more experienced, responsible, and able to respond quickly to road hazards.
Drivers over the age of 60 may also see rate increases because they are more likely to have impaired vision, hearing, and reflexes, which can make them more likely to get into an accident. You can offset these rising costs by switching to an insurer that offers senior discounts.
marital and family status
Single drivers pay more than married drivers for car insurance. Married people with adult children, children too young to drive, or no children tend to have the lowest rates.
but if you have teen drivers, beware, their rates can be expensive! Fortunately, you have options to help your teen driver save on auto insurance. You can even use this time to teach your children about the financial responsibilities of driving. having them pay for some or all of their car insurance now (with you there to guide them) helps them understand how insurance works. it also teaches them how to plan and buy the right insurance on their own later.
Auto insurance prices vary by zip code for two reasons: state laws and local risks.
Drivers typically pay higher premiums in states with no-fault auto insurance laws. And in any state, it can be dangerous to drive (or even park) your car in certain places.
for example, in big cities with crowded roads, the risk of having an accident is greater. and your car is more likely to be vandalized or stolen in a high crime area. But if you live in a small town or city with little crime, you may be able to get cheaper insurance.
You can’t control whether other people drive safely, but you can control yourself! That’s why many insurers offer good driver discounts. They’ll lower your rate if you go a certain number of months without filing a claim, because you’ve proven you’re a safe driver.
On the other hand, traffic violations, tickets, DUIs, or at-fault collisions will increase your auto insurance rate because you’re not following traffic rules. (How much they affect your premium depends on what happened, how many times it happened, and who your insurer is.)
Your credit history also has an impact on your auto insurance rates. But don’t worry too much about this, as credit scores are really just “I love debt” scores. And the more debt you pay off and money you save, the less you’ll worry about your auto insurance rates.
how much do you drive
There’s a simple reason insurance companies ask how much you drive. think about it: the more you drive, the greater your chances of being involved in a traffic incident or having your car damaged.
So if you drive your car every day, use busy roads, or take long trips, you’ll pay higher premiums than someone whose car sits in the garage most of the time.
type of car
This is a simple math: the more your car is worth, the more it costs to replace or repair it after an accident. Expensive cars, like sports cars or luxury sedans, are more expensive to insure than cheaper ones.
Here are some other ways your car affects your insurance:
insurance rates by car type
annual cost of full coverage insurance
compact suv (front)
medium vehicle (4×4)
half ton truck/double cab
There are three main types of auto insurance: liability, collision, and comprehensive. Having all three types of insurance (also known as comprehensive coverage) costs more than just liability, which is why some people skip collision and comprehensive coverage. But having just liability coverage isn’t always the smartest move. (Don’t worry, we’ll cover how to save money and get the right coverage in a minute!)
Additional coverages, such as guaranteed asset protection (gap), windshield coverage, or personal injury protection (pip), will also increase your premium. In some states, you must add pip insurance to your policy, but you can cancel the others.
policy limits and deductibles
Car insurance always has a policy limit (also called a coverage limit), which is the maximum amount the insurance company will pay for each type of coverage.
If your policy limits are low, the cost of your auto insurance will also be lower. just don’t aim too low: you don’t want to pay huge legal or medical bills out of pocket because your policy only covered half of what you needed.
Your deductible is the amount you pay before the insurance company begins to contribute. if your policy deductible is low (for example, $500), then your premium will be higher. That’s because you’re asking the insurance company to cover more costs for you.
But if you choose a higher deductible ($1,000 for example), you’ll pay lower premiums because you’re reducing the risk of losing money from the insurance company. It’s one of those “if you scratch their back, they’ll scratch yours” situations.
Another factor that influences the cost of car insurance is whether you are a new driver. So if you’re wondering how much car insurance costs for a new driver, here’s what we can tell you: People who are new to driving, no matter their age, can generally expect to pay more. This is in part because new drivers don’t have a driving record for the insurance company to review.
Another part is that most new drivers are teenagers. as it is one of the leading causes of death among adolescents in the us. uu. is car accidents, young people getting behind the wheel for the first time are simply at greater risk.3
Next, you may be wondering: If I’ve been driving for a year and never been in an accident, shouldn’t my rates be lowered? Insurance companies consider anyone who has been driving for less than three years to be a new driver. therefore, you may have to wait a bit longer to see those premiums drop.
That said, prices for new drivers vary based on your age, the amount of insurance you need, and the type of vehicle you drive. For example, if you are a new driver and drive a new Corvette, you will pay more. but no matter what your situation is, it’s always good to shop around to get the best rate.
Now that you know what’s involved in calculating your car insurance premium, let’s look at ways to save money on car insurance. These are some of our favorites:
raise your deductible.
We recommend raising your deductible to $1,000 and setting aside a fully funded emergency fund to cover that cost if an accident occurs.
look for discounts.
Did you know you can get discounts for joining a trade group, taking driving lessons, or paying for your insurance twice a year instead of monthly? ask your insurance agent what discounts you qualify for.
buy a used car.
Used car insurance is cheaper than new car insurance. We recommend saving up and buying a reliable and attractive used car with cash with the help of our free ramsey car guide.
group your toppings.
Combining your auto insurance with your homeowners insurance, renters insurance, other autos, or your spouse’s policy can lower your rates.
look for cover.
You may be able to get the same coverage for less from a different insurer. Shop around on your own or work with an independent insurance agent who can get quotes from different companies and help you choose the right one.
get only the essential toppings.
Let’s get something straight: having the right car insurance is much more important than having the cheapest car insurance!
You need at least $500,000 in liability insurance to pay the other driver’s costs after an accident (and to protect you from lawsuits). but comprehensive and collision coverage depends on your car and your financial situation.
You need comprehensive and collision coverage if your car is less than 10 years old and:
you don’t need integral and collision if:
be smart. Use our tips above to estimate the cost of your car insurance before you buy a car.
how to get cheap car insurance
we got it. It’s tempting to shop around for the cheapest car insurance or just the bare minimum coverage, but those cheap things may not give you enough coverage to truly protect your car (or your finances).
but here’s the good part: you can have the best of both worlds. Our team of Supported Local Providers (ELPS) will help you get the right car insurance, so you’re really covered, and they’ll compare car insurance rates to make sure you get the best deal. Plus, they’re very reliable, so you’re partnering with someone who will not only help you get the best deal on auto insurance, but also help you understand your coverage.
Connect with an auto insurance agent today!