Car insurance is a considerable expense for vehicle owners. There are many factors that affect rates, such as location, vehicle type and credit score. Average costs vary by state and the age of the driver.
This article will present average car insurance costs in the U.S. and examine how they are affected by different factors. It will also explore different ways that you can lower your car insurance premiums and answer some of the most commonly asked questions regarding insurance rates such as:
- The average car insurance rates in the U.S.
- Which factors determine car insurance rates?
- How to lower your car insurance premiums
The average car insurance rates in the U.S.
There’s a wide range of car insurance rates in the U.S. For drivers with clean driving records and good credit scores, a full-coverage policy is just under $1,700 a year, on average. This assumes deductibles of $100,000 per person, $300,000 per accident for bodily injury liability and $100,000 for property damage liability, which is known as 100/300/100 liability.
Rates by state
Average insurance costs vary widely based on the state the driver lives in. Different state laws require different minimum levels of coverage, and insurers also look at state-level incidences of theft, vandalism and urbanization. So how much is the average car insurance in each state?
A simple online search will give you wildly different numbers depending on which landing page you end up on. However, there is a general rule of thumb that can give you an idea. Urban areas with higher vehicle theft and vandalism rates will typically have higher rates than rural zones, since the latter are considered lower risk.
Vermont, for instance, is the most rural state in the country, and its car insurance rates tend to be lower. Florida, on the other hand, has some of the most expensive rates in the U.S., but it’s not due to urbanization, but rather because of its no-fault auto insurance laws, extreme weather, and high number of uninsured drivers.
Rates by driver age
As we mention below, age is a key factor in determining car insurance rates, due to risk perception. Actuarial math determines that younger and elderly drivers, at both sides of the age spectrum, are considered higher risk.
Rates by credit score
In many states, insurance companies are allowed to use credit scores when determining insurance rates. Although credit scores have nothing to do with your driving record, a 2007 study by the Federal Trade Commission found that individuals with lower credit scores file more car insurance claims and higher cost claims, on average. This is why insurers typically charge higher rates for drivers with poor credit scores.
Which factors determine car insurance rates?
A number of factors go into the calculation of auto insurance rates. Age, location, type of vehicle, annual miles driven, credit score and driving history are all elements that car insurers may look at when setting rates.
Youth and old age both lead to higher insurance rates. So how much is car insurance for teens? Teenagers tend to have higher accident rates and so face more expensive car insurance rates, as they’re considered high-risk. Car insurance can cost hundreds or even thousands of dollars more than for drivers in their 20s and older. Since teens are new drivers without much experience on the road, this makes them more likely to be involved in an accident.
Rates steadily decline from age 25, until drivers reach 65 years old. At this point, rates begin to rise, as senior drivers are more likely to be involved in collisions. According to the Centers for Disease Control, some of the reasons for this are changes in vision, decreased cognitive ability, age-related physical changes, medications and some age-related diseases. All of these factors taken together make senior drivers more likely to file car insurance claims, leading to higher premiums.
Car insurance companies look at more than just the state you live in when using location to calculate your car insurance rates. They also look at your city and your zip code. There are some location-related factors that impact how often you may need to file a claim. For instance, if you live in an area that regularly experiences extreme weather conditions, such as heavy winds and flooding, there is a higher probability that your car will experience weather-related damage. To compensate for this, the insurer will probably charge you higher premiums.
Similarly, if other people in your area file a lot of claims, your insurance company assumes that you’ll be more likely to file a claim as well. You will be charged a higher rate to offset the high probability that the insurer will have to pay out during the duration of your policy.
Other location-related factors are road conditions, crime levels and population density.
Vehicle make, model, year and safety features
The type of car you have plays a role in determining your car insurance rate. Here are some of the ways car type impacts rates:
- Cost of the car: Expensive makes and models will lead to higher premiums. Car insurers have to replace cars that are stolen or totaled in a collision and the more expensive the car, the more the insurance company will have to pay out.
- Cost of repairs: Some vehicle makes and models are more expensive to repair than others. Parts may be more difficult and costly to obtain, for example. Insurers will charge higher rates for these cars to make up for the extra expense they will incur if they wind up needing to cover the cost of repairs.
- Age: Cars depreciate quickly so insurance rates generally go down as a car ages. Replacing an older car is usually less expensive for the insurance company so they can charge less for premiums.
- Theft rate: Some vehicles are notorious for being stolen, such as Chevrolet and Ford full-size pick-up trucks and Honda Civics and Accords, according to the National Insurance Crime Bureau. With comprehensive coverage, your insurance company will pay to replace your car if it’s stolen, so if you have a vehicle that is more prone to theft, your rates will be higher.
- Horsepower: Vehicles with a lot of horsepower are able to travel fast. Speeding increases the likelihood of a car being involved in an accident, and to offset this, auto insurers increase rates.
- Safety features: Many new vehicles come with advanced safety features, such as collision warning and blind spot detection. These features help drivers avoid becoming involved in an accident, but also increase repair costs when accidents do occur. Some companies may give discounts for safety features but it is not a widespread practice at this time.
Average annual mileage
The more time you spend driving, the more likely you are to get into an accident at some point. This is why some insurance companies offer discounts for drivers who have low annual mileage. Discounts are given on a company-by-company basis, so details vary. Companies use different thresholds as a cutoff for low-mileage discounts and each determines its own discount percentage. Also, some companies use the mileage reported by the driver on the insurance application, while others utilize technology, such as OnStar, to track a policyholder's actual miles driven throughout the year.
Credit scores sometimes play a role in determining car insurance premiums. Some states have restricted how much auto insurers can use credit history when calculating rates. Here's a look at the states that have laws in place to limit or ban the use of credit scores by car insurance companies:
- California, Hawaii, Massachusetts and Michigan: Credit-based scores and credit history cannot be used to deny or cancel coverage or be used to calculate rates.
- Maryland: Credit can be used as a factor when setting initial rates, but it cannot be used to deny or cancel coverage or to increase rates upon renewal.
- Oregon: Credit can be used as part of the decision-making process when deciding whether to cover a driver, but it cannot be the only factor used. After 60 days, policies cannot be canceled or denied renewal based on credit. Insurance discounts can be given for good credit, but bad credit cannot be used to charge higher premiums.
- Washington: In 2020, the state temporarily banned insurance companies from increasing rates due to poor credit in response to the pandemic. Some legislators have attempted to make this ban permanent but so far have been unable to do so.
Traffic violations and accidents will cause your insurance rates to skyrocket. If you have a bad driving record, you can expect to pay more than double what you would pay with a clean record. As with most factors that affect insurance rates, the state you live in has an impact on how your driving record impacts what you pay.
Interestingly, despite the tired trope that women are bad drivers, they’re actually statistically less likely to cause a car accident, even accounting for their usually driving less miles than men. Insurers therefore tend to charge women lower rates.
How to lower your car insurance premiums
Now that you understand the factors that go into calculating your insurance rate, you're probably wondering what you can do to lower your premiums. Luckily, there are some things that are in your control and are short of buying a new car or moving out of state. Here are a few simple ways you can pay less.
Join your parent's existing policy
Teen drivers pay considerably more for car insurance than any other age group. If you're a teenager, one way to avoid paying high premiums is to be added as a driver to your parent's policy. As long as your permanent address is the same as your parent's (even if, for example, you live on a college campus for part of the year) and your name isn’t on the car title, you can join your parent's existing policy. This will almost always result in lower premiums than if you were on your own policy as a teen driver.
Pay in full rather than monthly
Most insurance policies offer a discount if you pay your premium in full upfront rather than making monthly payments. Pay-in-full discounts are usually about 5% to 10% off, which can equal hundreds of dollars depending on your premium amount.
Build good credit history
Since credit-based scores have a significant impact on insurance rates in most states, building a good credit history can lead to big savings on your premiums. The best way to do this is to use credit cards responsibly and always pay your balances and other bills in full each month. If you have poor credit, you may want to consider working with a credit counseling agency. It will take some time to see your score go up but when it does you will find that your car insurance bill drops drastically.
Comparison shop to find affordable car insurance
When shopping for the best car insurance at the lowest price, always compare car insurance prices from different companies. Shopping for car insurance online makes this easy. Most companies offer no-obligation car insurance quotes so you can compare multiple policies and prices until you find the best deal.
When you get a quote for car insurance, check the coverage limits. Depending on your needs, you may be able to request lower limits to reduce your premiums. You can also ask a company if they offer any additional discounts that are not offered in your initial quote.
If you have an old vehicle and can afford to repair or replace it if need be, it may not be worth paying for comprehensive and collision coverage. You will reduce your premiums without these optional coverages but make sure you only forgo them if you are confident they are not worth it for your vehicle.
When your policy length is up and it is time to renew, don't forget to look around again. You might be able to get a better price if you switch car insurance companies from time to time rather than sticking with the same one forever.