How much does car insurance cost?
December 20, 2022 11 min read
From weekend joy rides to workday commutes, owning a car can offer plenty of fun and function. But car ownership comes with lots of expenses to manage—gas, maintenance and auto insurance.
If you’re shopping around for car insurance, it might help to know that prices can differ from person to person. They can differ from carrier to carrier, too. This guide will explain about factors that can impact auto insurance costs as well as ways to save on your policy.
- Your car insurance premium is the amount you’ll pay on a regular basis for your policy; your deductible is the amount you’ll pay out of pocket on a claim before your insurance company starts to pay.
- The average annual premium is $1,771 for a full-coverage policy and $545 for a minimum-coverage policy, according to a Bankrate analysis of current rates.
- A variety of factors can impact your car insurance premium. They include your demographic information, driving habits and the type of policy being secured.
- Ways to save on car insurance may include shopping around for quotes, bundling insurance policies and looking for policy discounts.
Types of car insurance
A basic car insurance policy typically consists of six main components: property damage liability coverage, bodily injury liability coverage, collision coverage, comprehensive coverage, uninsured and underinsured motorist coverage, and medical payments coverage or personal injury protection (PIP).
Each of these coverages is priced individually. That’s why the cost of car insurance varies from policy to policy. Here are details about each type of insurance:
- Property damage liability coverage: Pays for the policyholder or a person driving the policyholder’s vehicle in the event of an accident that damages another person’s property
- Bodily injury liability coverage: Applies to bodily injury caused by the policyholder to somebody else
- Collision coverage: Helps pay for repairs to a policyholder’s vehicle in certain situations including when it collides with another car or an object like a tree
- Comprehensive coverage: Covers the policyholder's vehicle for theft as well as damage from hail, vandalism and other incidences not related to a collision
- Uninsured and underinsured motorist coverage: Reimburses the policyholder, a member of their family or a designated driver if one of them is hit by an uninsured driver or a driver without adequate insurance to cover the injured person’s loss
- Medical payments coverage or PIP: Helps pay for treating injuries to a driver and passengers in a policyholder’s vehicle and possibly covers other things like lost wages
For a more extensive explanation, you can check out this guide on the different types of car insurance.
Car insurance requirements
The type of car insurance you need may depend on where you live. For example, most states require drivers to have liability insurance, but they generally don’t require collision or comprehensive coverage. And all states require that drivers carry property damage and bodily injury liability insurance, except for New Hampshire.
Average cost of car insurance
Car insurance prices can change based on the amount of insurance you choose. Every state has requirements for minimum coverage—for example, some might stipulate that policyholders carry at least bodily injury and property damage insurance.
Similarly, there’s no industry standard for full-coverage car insurance. But full-coverage policies could incorporate higher liability limits with collision and comprehensive coverage for your vehicle. You could also decide to add insurance like medical payments coverage.
While additional insurance may increase your premium, it could offer more protection in certain situations.
Average cost of minimum and maximum coverage
According to Bankrate, the average cost of a minimum-coverage policy in the US is $545 per year. That’s around $45 per month. The average cost for a maximum-coverage policy is $1,771 per year, or about $148 per month.
The cost can vary depending on a number of factors. They can include the type of car insurance you’re looking for, the insurance carrier, the state you live in and other demographic information.
Car insurance variables
Average cost of car insurance by state
The state an insured driver resides in can impact the cost of their auto insurance policy. Based on an analysis by Bankrate, the average annual premium for full-coverage insurance is highest in New York ($2,996), Louisiana ($2,864) and Florida ($2,762). It was lowest in Maine ($876), Vermont ($1,000) and Idaho ($1,065).
Average cost of car insurance by age
Insurance carriers can consider a person’s age when calculating their premium. Here are the average full-coverage premiums for various age groups, according to Bankrate:
|Age||Average annual cost for full-coverage premium|
Average cost of car insurance based on driving history
The amount an insured driver pays for their premium can be affected by their driving history. For example, their premium could go up if they have an accident. In that case, the amount of the increase can vary by things like the policyholder’s home state and their car insurance company. Here’s how Bankrate breaks it down:
|Driving history||Average annual cost for full-coverage premium|
|Clean driving record||$1,771|
Factors that impact the cost of car insurance
So now you have an idea about how much car insurance might cost. Here’s a closer look at some of the factors and variables that can determine those prices.
- Type of policy: People who opt for only liability coverage might pay less than those who choose a more robust plan—for example, one that also includes comprehensive coverage and uninsured or underinsured motorist coverage.
- Policy deductible: Your deductible—that’s the amount you’ll pay out of pocket before your insurance company starts to pay—can be increased or decreased when you’re choosing a policy. Typically, a higher deductible will result in a lower premium.
- Optional add-ons: Certain insurance companies offer additional protections, like rental car reimbursement or window and windshield glass coverage, that can be added to a policy.
- Location: Where the insured will be driving and parking their vehicle can impact the cost of their policy. For example, drivers in geographic locations that experience more severe weather conditions can have higher premiums.
- Age: Older drivers are generally involved in fewer accidents. That’s why insurance carriers typically charge more for policies that cover teens and younger drivers. Once a driver reaches 65, however, some companies may increase their premiums.
- Gender: Certain states will consider the gender of the insured driver. Women typically pay less for car insurance premiums than men do because they’re less likely to be involved in serious car crashes.
- Credit score: In certain states, insurance carriers use a credit-based insurance score to predict the risk of a claim being filed. Typically, drivers with better credit scores are less likely to file a claim—and for that reason, they may pay less for their premiums.
- Driving record: Drivers with a safer driving history tend to have lower premiums than those with accidents, speeding tickets, traffic violations and more.
Vehicle- and driving-specific factors
- Type of car: An insurance carrier may consider a vehicle’s year, make and model when determining the overall premium. Newer cars tend to be more costly, which can raise the premium. If a newer car is equipped with enhanced safety features, it may be eligible for a discount.
- Amount of driving: Those who drive more miles may have a higher chance of getting in accidents. That’s why insurance carriers may charge more for those policyholders.
- Type of driving: Some insurance companies may also rate miles used toward commuting differently than miles driven for recreational purposes. Recreational driving—or pleasure use—can result in a lower rate than commuting.
How to save money on car insurance
A policyholder’s location and gender might be out of their control. But there are ways to save money on car insurance:
- Comparing quotes: Insurance companies weigh risk differently, so it’s helpful to compare quotes to find the best policy for you. When requesting quotes from different companies, make sure to use the same options to ensure you’re getting an apples-to-apples comparison. Check out this guide to learn more about how to compare car insurance quotes and providers.
- Opting for a higher deductible: The deductible on your policy is the amount you’ll pay out of pocket on a claim before your insurance company starts to pay. In general, a higher deductible may result in a lower premium. The potential downside to lowering your premium by raising your deductible is that it could cost you more to make a claim.
- Bundling your policies: Some insurance companies offer lower premiums for policyholders who bundle their policies. That means purchasing different types of insurance—like homeowners and auto policies—from the same carrier.
- Looking for discounts: Insurance companies may sometimes offer different types of discounts to lower premiums. These can include safe driving discounts, loyalty discounts or discounts for student drivers with good grades.
- Paying premiums in full: Some insurance carriers may offer a discount if you pay your premium annually or quarterly rather than monthly.
- Maintaining a strong credit score: Some car insurance carriers consider an insured driver’s credit when calculating their rate. Building and maintaining good credit could help you save on the cost of your car insurance premiums. Use this guide to learn how to improve your credit score.
Cost of car insurance in a nutshell
Car insurance is typically a necessary cost when owning a vehicle. The amount you pay for a policy can differ depending on a variety of factors, including where you live.
There are a number of things you can do to help lower your annual premium. They include everything from comparing quotes from different carriers to bundling your home and auto policies with the same company.