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Overpaying on car insurance?

Overpaying on car insurance?

Overpaying on car insurance?

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How Much Does Car Insurance Cost?


The average cost of car insurance in America is about $1,321 per year, but the amount you pay depends on where you live, your type of car, and your driving record, among other factors. Therefore, auto insurance premiums will not be the same for everyone. Every policyholder has unique needs, styles, and budgets. While auto insurance is mandatory in most states across the U.S., the minimum property damage and bodily injury liability will likely not cover all expenses in the event of an accident.

It’s also essential to understand that insurance rates vary from one insurance company to another. Each company has its own criteria for determining rates. You might want to shop around and check quotes before settling on a specific insurance company. In this post, you will learn everything about auto insurance costs and which significant factors affect your premiums. Before we continue, we recommend that you read our comprehensive beginner car insurance guide to learn everything you need to know before contacting an insurance agent or starting your car insurance search online.

How Much Is Car Insurance?

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The average monthly cost of car insurance is $110, according to U.S. News. This translates to $1,320 per year. Rates include primary coverage and optional but critical car insurance coverages such as comprehensive, collision, and uninsured or underinsured motorist. Apart from the mandatory liability insurance, you can add coverages depending on your budget and the types of coverages you choose. Different states also have certain driving and auto insurance laws, which can impact the cost of car insurance.

How Much Is Car Insurance Based on Certain Factors?

Insurance companies use the information you provide when applying for insurance to determine how much you’ll pay. Every insurance company can set its car insurance requirements and regulations in line with state requirements. This means that they use different criteria to calculate your premiums.

In simple terms, they check several factors, including your driving history, location, car make and model, and demographics, to determine how likely you are to file an insurance claim. Each insurance company treats each factor differently.

If you live in a safe neighborhood with little or no cases of car theft or crime, a company can lower your premiums by a certain percentage based on their criterion.

All these changes can result in different rates for everyone. Getting low rates doesn’t mean the company offers subpar coverages. Sometimes low rates are due to factors that align with the company policies, such as a good driving record, excellent credit score, driving a relatively safe car, and living in a safe environment. If the cost of car insurance is breaking your bank and you want to do something about it, we advise reading our guide on how to get affordable full coverage car insurance.

How Do Age and Gender Affect Auto Insurance Rates?

Age is a significant factor when calculating your auto insurance premiums. The younger you are, the more you pay. Statista depicts the average auto insurance expenditure in the United States by age in 2021. The simple reason behind it is that young people are more likely to cause an accident than older, more experienced drivers.

According to a 2014-2015 AAA Foundation’s American Driving Survey, young drivers between ages 16 and 18 are 4.5 times more likely to cause car accidents than drivers between 30 and 59 years. As a result, young drivers pay more for their car insurance than their parents do. If you live in Massachusetts or Hawaii, your age will not be used as a rating factor.

Gender is also a premium factor for most insurance companies. Men are likely to pay more than women as men are more likely to engage in risky driving than women. It is also true that men have a higher accident severity rate than women. However, a handful of states prohibit using gender as a rating factor. They include:

  • Massachusetts
  • Hawaii
  • North Carolina
  • Michigan
  • California
  • Pennsylvania

How Much Is Car Insurance Based on Vehicle Type?

When you apply for car insurance, the vehicle you want to insure has a significant impact on your premium. The insurance company has to consider the cost of labor repairs, availability of parts, and potential accident risk. Generally, some vehicle models are considered expensive to insure, such as sports and luxury cars.

Your insurer may want to know where you store the car and assess the crime rate in your area. Big vehicles like SUVs and pickup trucks cost more to insure as they can cause more damage to property and other motorists than sedans due to their weight and size. Use our guide on how to find the best SUV insurance at the best price to find the policy you need without going over budget.

How Much Is Car Insurance Based on Your Credit Score?

A lower credit score often means higher premiums and vice versa. Generally, most insurance companies consider drivers with good credit scores less risky to insure. As a result, those drivers can often receive substantial savings on their auto insurance costs.

If your credit score is low enough, some insurance companies will charge you 30% more while others may charge over 100% more. A few states, such as Massachusetts, Michigan, Hawaii, Utah, and Oregon, have banned using credit scores as a factor when setting car insurance premiums. Washington is still evaluating whether or not it will ban credit scores as a rating factor.

Tips for Reducing Your Car Insurance Rates

While you may not be in control of some of the factors that can affect your insurance premium, there are several ways you can reduce it.

  • Shop around and compare quotes from different insurance companies. Don’t forget to check their coverages and limits.
  • Buy all your insurance policies from the same provider to earn discounts.
  • Take driving classes to improve your skills. Some insurance companies will ask for documents and driving test results when determining your insurance premium.
  • Use the online insurance calculator to monitor your auto insurance cost. Check discounts and offers by companies to ensure you get the most value for your money.
  • Monitor your driving habits to avoid breaking simple driving laws.
  • Only buy the coverages you need. It’s essential to know your car driving needs, choose critical coverages, and avoid spending extra on coverages you may never need.

Final Thoughts

The cost of car insurance is a critical factor when choosing an insurance provider. You’ll also want to consider picking a reputable insurer with a simple claims process. Once you know which factors insurance companies check, you can approximate the amount you will likely pay for your car insurance. If you’re looking for a great insurance plan from a reputable company with high ratings but don’t know where to start, check out our list of the best-rated car insurance companies here.

FIXD Research Team

At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.

We’re here to help you simplify car care and save, so this post may contain affiliate links to help you do just that. If you click on a link and take action, we may earn a commission. However, the analysis and opinions expressed are our own.


About the Author

FIXD Research Team

FIXD Research Team

At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.

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