The average annual cost of car insurance in the U.S. was $1,096 in 2019, according to the latest data available in a report from the National Association of Insurance Commissioners. However, knowing that statistic won't necessarily help you figure out how much you will be paying for your own coverage. Rates vary significantly, and they're based on personal details.
To better understand what you should be paying for auto insurance, it's best to learn about the way companies determine their rates. Keep reading for an overview of the most common determinants, and how you can earn a few extra savings.
Calculating Average Annual Car Insurance Cost
There are a lot of factors that go into determining your car insurance rate. You can change some of these factors easily, others will take work to change, and others are out of your control. Here are some key factors that impact the average cost of car insurance in America.
Gender: Men are generally regarded as riskier drivers than women. The statistics show that women have fewer DUI incidents than men, as well as fewer crashes. When women do get in an accident, it's statistically less likely to be a serious accident
Age: Those under the age of 25 are considered risky drivers because of their age. Teenagers and brand new drivers are especially risky. If you're younger than 25 years old, you can expect to pay higher premiums.
Location: If you drive around Manhattan, you are a lot more likely to get in an accident than if you usually stick to backcountry roads in rural Kentucky. It isn't just the amount of traffic that affects regional premium prices—local rates of vandalism, theft, and natural disasters will also be reflected in your premium price.
Marital status: Marriage means thinking for two people—and it signals to insurers that you’re less risky than you were in your single days. The statistics bear that out, with married people getting in fewer accidents. As a result, married people save on their rates.
Something less obvious is at play here, too; if your state mandates certain standards for car insurance that are stricter than others, you’re likely to pay more money. Michigan, for example, requires residents to have unlimited lifetime personal injury protection (PIP) for accident-related medical expenses as a part of their car insurance. This is one of the reasons why premiums in Michigan are among the most expensive in the country.
The Most and Least Expensive States
In 2018, the most expensive state for auto insurance was Louisiana, with an average annual cost of $1,545.82. Michigan came in second, followed by District of Colombia, Florida, and New York. The least expensive state was North Dakota, with an average annual cost of just under $686.08. The second least expensive state was Maine, followed by Iowa, South Dakota, and Idaho.
Occupation: If you are using your car as an actual taxi or driving for a rideshare service, you will have to pay more for insurance, and you might need to pay for a different type of insurance altogether. Talk to your company and your insurance agent about how your job can affect your rate.
Driving habits: The length of your commute, how often you use your car, why you use your car, and where you park all impact your premiums. If you have a long commute, you are exposed to the risks of the road for longer. If you drive more often, you're exposed to the risks of the road more frequently. Carpooling, telecommuting, and taking public transportation could all save you money in premiums.
Driving history: This one should be pretty obvious. If you have a history of racking up tickets, you are a riskier driver to insure, and you will pay more in premiums. Installing tracking software on your vehicle could help lower your premiums when you have a less-than-perfect history.
Type of vehicle: That super sleek sports car you've always wanted? It’s not just going to cost you the sticker price: driving a valuable car makes you riskier to insure. That's because driving a flashy car makes you a target for criminals. Insurance premiums also account for the overall safety of a car and the average cost of repairs. If you’re looking to save on insurance, buy a minivan, a sensible sedan, or an SUV. You should also consider buying a used car and installing anti-theft devices.
It isn't just fancy sports cars that are frequently targeted by thieves. According to the National Insurance Crime Bureau, the most-stolen vehicle in 2020 was a Ford Full Size Pickup. A Ford Pickup might not be your dream car, but you'll pay higher premiums, anyway.
Credit score: Your terms for pretty much any financial transaction will be greatly improved if you improve your credit score. A higher credit score means you’re less of a financial risk, and it also signals that you’re generally more responsible.
While there's no instantaneous cure for a poor score, there are a lot of steps you can take to improve your credit score. Potential steps include building up a history of paying bills on time, avoiding too many checks on your credit, and using less than your available credit.
How to Save on Average Car Insurance Costs
Aside from addressing each of the premium factors individually, there are a few extra tips you can use to save money on premiums.
Choose a cheaper policy: Comprehensive coverage with all the extra perks will cost you more in premiums than simple minimum liability coverage. Keep in mind that you get what you pay for—if you’re in an accident, you’ll probably be glad you didn’t choose this as an area to scrimp and save on. On the other hand, if you never need to make a claim, you'll have pocketed the extra savings without consequence.
Shop around: It’s pretty much the golden rule of shopping that you should never go with the first offer. You already know that not all coverage levels are created equal, but until you go out and see what’s available, you will never know whether or not you’re getting the best deal for the amount of coverage you want.
Ask about discounts: Are you a straight-A student? Active duty in the military? An AAA member? These are just a few of the qualities that could make you eligible for a discount on your insurance premium. But here’s the catch: Different companies offer different sorts of incentives, so you’ll want to shop around and ask the insurance agents about these discounts.
Consider bundling: You may get a discount for getting different types of insurance through your auto insurance provider, such as home or rental insurance. Ask an agent what other insurance is available and whether you'd get a discount for bundling the coverage.