Car insurance is a must-have, especially if you live in a state that mandates such a requirement to drive legally. More so, it can also provide peace of mind. Depending on the type, it can extend not just motorist coverage, but also coverage to the properties and other people you can hurt in an accident.
However, one thing can hinder many people from getting auto insurance – its costs. The monthly or annual cost can depend on many factors. For instance, drivers with poor credit may end up paying more. Your driving history might also be relevant. Not to mention, vehicle type, age, and location can also be influential.
A lot of you are probably wondering – how much should I pay for car insurance? Well, there’s no rule of thumb. It depends on many factors. Nonetheless, to help you better understand car insurance rates, read on and learn from some insights we’ll share in this short guide.
How to Save on Car Insurance
Whether you were involved in an accident or you have a stolen car, insurance can be your savior. It can provide financial and legal protection, although such depends on your coverage. As such, it can be a good investment for drivers. Do not let the cost become a hindrance. If you find it expensive, below are some things to do to help you save on car insurance costs.
- Remove Some Add-Ons
Think about what you need and what you don’t. Some coverage may be unnecessary. For instance, you might not need roadside assistance and uninsured motorists. By eliminating some add-ons, you can lower the average cost.
- Improve Your Credit Score
In the same way that it can impact life insurance, renters insurance, and mortgage rates, a lower score can equate to a higher risk.
Check your reports and correct them when there are errors. Pay your personal and business credit cards on time. You might want to explore a balance transfer and debt consolidation if you’re having a hard time paying your debts. You must also settle your dues for student loans on time.
- Consider Bundling
If you are looking to shop car insurance quotes, you might find that some of the companies are also offering other types of insurance. You can potentially be eligible for discounts by also buying other types of insurance from the same company, such as insurance for a real estate property.
- Use Your Cards for Payments
By paying with credit cards like American Express and Chase Sapphire, you can be eligible for rebates and cashback. This way, your insurance can end up being a little cheaper because you’re getting something in return.
Why Some Cars Cost More to Insure
The auto insurance cost can vary greatly depending on many factors. Among others, one thing that can be highly influential in car insurance rates is the car that you drive, including its costs and features.
- A Car’s Retail Price
Expect higher insurance premiums if you have a luxury or vintage car. Consequently, the cheapest cars can be more affordable to insure.
- Repair Cost
The more expensive it is to repair a car, the higher the average car insurance rate can be. From the cost of labor to materials, insurers need to find a way to make sure they can cover the repairs when your vehicle needs it.
- Fuel Economy
In most cases, it might be cheaper to insure more fuel-efficient cars. They often have smaller engines, which can also be cheaper to repair. Not to mention, fuel-efficient cars are often driven by people who respect speed limits, and hence, they can potentially be at lower risk of accidents.
- Theft Rates
A higher theft rate can also translate to a higher average auto insurance rate. If you have a car that is prone to be stolen, expect the premium to be higher as well.
- Safety Devices
The presence of safety devices can help lower the premium, such as a car tracking device. Like with homeowners insurance, state-of-the-art devices can equate to lower risks.
How Much Car Insurance You Need
The bare minimum should be what your state requires. When we talk about how much car insurance you need, we are not talking about the cost of auto insurance. Instead, we’re referring to the minimum your insurance has to cover.
Let’s say you’re from Texas. The minimum requirement for liability coverage is 30/60/25. It means that your insurance needs to cover $30,000 for bodily injury liability per person per accident, $60,000 for bodily injury liability per accident, and $25,000 for property damage per accident.
Likewise, if you’re getting personal injury protection, the amount you need will vary per state. For instance, in Florida where this type of insurance is mandatory, the minimum policy is $10,000.
More so, with collision and comprehensive coverage, states don’t require them, so no need to follow any minimum.
Factors Affecting Your Premiums
Several factors will impact the average cost of car insurance, including those we’ll talk about below. From the driver’s age to cost by credit score, several factors come into play.
- Coverage Selection
One of the biggest factors that affect car insurance premiums is the specific coverage that you choose. The higher the coverage, the higher the premium is most likely to cost. Below are some of the most common types of coverage that can come with your insurance:
- Liability coverage
- Collision coverage
- Comprehensive coverage
- Medical expense coverage
- Uninsured motorist coverage
- Gap coverage
- Roadside assistance coverage
Looking at car insurance cost by age, you’ll find that teen drivers often have the highest premiums. Because of their lack of experience, some companies will see younger people to be at higher risk of accidents. The rates by age can decrease once drivers get older, but they can increase again once they hit 65 years old. You might see the same trend in travel insurance.
Before you assume that car insurance rates are discriminatory, look at the data. Statistically, men engage in riskier driving behavior. Nonetheless, age and gender are related. As men become older, their gap narrows.
- Driving Records
Your past can be a predictor of future driving behavior. So, if you were involved in several accidents, insurers may view you as a higher risk. More so, having an atfault accident and speeding ticket might also raise your rate. Meanwhile, those who maintained good driver profiles can have the advantage of a lower average cost of car insurance.
While it can depend on where you live, your annual mileage might impact your premium. Notably, those in California will pay a higher insurance rate if they drive more within a year. The difference can be as high as 32%.
Your zip code is another factor that determines insurance costs by company. Population density, weather, climate, unemployment, and car theft rates are some of the factors that can make some locations have more expensive car insurance. More so, the minimum auto insurance requirements in each state can dictate what you must pay.
- Credit Score
Depending on where you live, poor credit can be a curse. Some insurers are legally allowed to use credit scoring as the basis for determining insurance rates. Like an auto loan, home equity loan, and personal loan, bad credit can make lenders assume you are a higher risk, hence, the premium might increase. Take note, however, that insurance scores are different from your regular credit rating.
- Car Type
This is one thing we have already discussed earlier. More expensive types of car can be costlier to insure, especially if their parts are hard to source or find. In addition, those with state-of-the-art safety features can have more affordable premiums.
- Car Insurance History
If you’ve had car insurance before, your history can also affect your premium. For example, if your insurance was previously canceled because of non-payments, you might end up having a higher rate. Such can also be the case if you made multiple insurance claims as this can affect the risk assessment.
- Marital Status
While it’s minor compared to others on this list, this factor can also be influential in car insurance costs. Married people are believed to have better financial stability, which is why their premiums are slightly lower. Although, it should be pointed out that in Michigan, there is a law that prohibits an insurance company from basing the premium on whether you are single or married.
- Insurance Company
Providers like Quadrant Information Services use data from insurer filings to evaluate auto insurance companies. You can find them online to help you narrow down the possibilities based on insurers within your budget.
How Can I Find the Cheapest Car Insurance for Me?
Comparing insurance prices can be tasking. Nonetheless, you should not see this as an excuse to decide in haste. To help you compare car insurance coverage based on price, below are the most important things to consider.
- Ask Around
Just like when comparing home insurance, or any other type of insurance, it’s best to ask around. Talk to family and friends who bought insurance before, and learn from their real-life experiences. Their stories can help you narrow down the possibilities and prevent the same mistake they made.
- Go Online
Luckily, finding the cheapest car insurance premium does not have to be difficult. You can do it online, so you can research rates anywhere and anytime. Some will have built-in tools like insurance and loan calculators, so you’ll know how much to pay. The insurer can also send quotes via email for convenience.
- Collect Multiple Quotes
It can be tempting to immediately settle with the first offer you get. However, it’s best to compare several car insurance quotes. At the very least, you should ask from at least three companies. Do not just compare rates, but also look at the specific coverage, as well as the terms and conditions.
How Much Should I Be Paying for Auto Insurance?
There’s no easy way to answer this question. To give you a rough idea of how much to pay for auto insurance, let’s talk about the minimum liability coverage in different states.
Obviously, it will be different depending on where you live. In some states, the average car insurance can be cheaper than the others. Nonetheless, while the minimum can be the baseline, some people prefer buying more than that so they can enjoy better coverage car insurance.
The data below is from a Forbes Advisor article. Take note that these can change over time, so make sure to check local laws. The figures below pertain to the average annual cost for minimum coverage, so such is the lowest you can expect to pay.
- California: $764
- Delaware: $935
- Florida: $1,286
- Idaho: $341
- Michigan: $1,450
- New Jersey: $1,119
- New York: $1,016
- North Carolina: $455
- North Dakota: $351
- Ohio: $345
- Rhode Island: $682
- South Dakota: $301
- South Carolina: $755
- Vermont: $278
- West Virginia:$477
- Wyoming: $295
Meanwhile, the national average is $1,601. This is already for annual full coverage insurance. It translates to around $133 cost of auto insurance per month. On the other hand, if you want only the state minimum coverage, the average car insurance cost in the United States is $513.
It is also worth looking at insurance cost by company. Each company assesses risk differently, so it’s best to get in touch with their representatives or visit their websites. While you’re already on their websites, you might want to check advertiser disclosure and what personal information they collect from users to ensure your privacy.
How Can I Get Cheap Car Insurance?
If you want the cheapest car insurance, below are some of the things you can do.
- Increase Your Deductible
A deductible is an out-of-pocket fee when making a claim. By increasing this amount, you can potentially enjoy more affordable auto insurance rates. When the time comes you need to pay the deductible, you can use money from your savings account or checking account. You can also use earnings from CD rates.
- Pick a More Affordable Vehicle
You can qualify for cheap car insurance if your vehicle is more affordable. This way, it won’t be too expensive to repair, and hence, the insurer might see it as a lower risk.
- Consider Local and Regional Insurers
Do not focus too much on the big car insurance companies. Instead, look at what local and regional insurers can also offer, and see if it’s worth it.