How Much Does Car Insurance Cost on Average?
If you're a licensed driver, carrying proper auto insurance is essential for financial protection. But for many households, the cost of coverage is a major concern. Nationwide, drivers pay an average of $1,548 annually for car insurance. However, rates can vary dramatically based on your location, driving profile and policy choices.
This comprehensive guide will explain average insurance costs, what impacts pricing, and effective ways to minimize your premiums without sacrificing critical protection. Let's break down the key factors influencing car insurance rates.
Auto Insurance Basics - Liability Coverage
Liability insurance covers bodily injury and property damage you cause to other parties in an at-fault accident. It does NOT cover repairs to your own vehicle or medical bills for you or your passengers.
Liability insurance includes:
- Bodily Injury - Covers injuries to other drivers, passengers, pedestrians, motorcyclists, and bicyclists that you injure in a crash. Pays for medical treatment, lost wages, rehabilitation and pain and suffering.
- Property Damage - Covers repairs or replacement cost for another party's vehicle or property damaged by you in a collision. For example, knocking down a light pole or damaging a fence.
Nearly every state requires drivers to carry minimum liability insurance amounts:
- Bodily injury per person - Covers each person's injuries up to this limit in an accident
- Bodily injury per occurrence - Total coverage for all injuries per accident
- Property damage per occurrence - Repair costs to property
For example, common minimums are:
- $25,000 bodily injury per person
- $50,000 bodily injury per occurrence
- $25,000 property damage per occurrence
However, experts recommend 100/300/100 limits or even higher for adequate protection. Minimums may not be enough for serious accidents.
The cost for basic liability insurance meeting state minimum requirements ranges from $300 - $800 per year on average depending on your location and driving record. However, most drivers need additional coverage options.
Physical Damage Coverage
Unlike liability which protects others, physical damage coverage protects your own vehicle. There are two common types:
- Collision - Repairs or replaces your vehicle if damaged in an accident with another car, object or if flipped. Subject to your chosen deductible.
- Comprehensive - Covers damage to your car from non-collision incidents including weather events, vandalism, theft, animals, fire and flying debris. Also subject to a deductible.
Collision and comprehensive have variable costs depending on your desired deductible, vehicle make/model/age and your driving risk profile. Average annual premium costs range from $200 for minimal coverage with high deductibles to over $2,000 for maximum coverage with low deductibles.
Choosing higher deductibles like $500, $1,000 or $2,000 brings costs down. But have funds to cover your selected deductible if you need to file a claim.
Key Factors Impacting Car Insurance Rates
Insurers consider a wide variety of personal and vehicle factors when pricing policies. How these factors apply to you determines your rates.
Age and Experience
Younger drivers under 25 pay the highest auto insurance rates on average, often over $3,000 annually. Rates gradually decrease through middle age then rise again after age 70. Teen drivers pay nearly 3x the average cost for coverage.
Location and Population Density
Insurance is pricier in densely populated metro areas due to increased accident risk and higher costs. Rural and suburban rates are generally lowest. Certain states also have higher baseline rates.
Vehicle Make, Model and Age
Premiums are based partly on the vehicle’s repair costs, safety ratings, accident stats and theft rates. Sports cars, luxury brands and SUVs often have pricier premiums. Rates are also higher for brand new vehicles.
Driving Record
At-fault accidents, DUIs, tickets and claims substantially increase rates due to increased perceived risk. Just one incident can raise premiums 30% or more. Multiple issues lead to dramatic hikes.
Credit History
Most states allow insurers to use credit-based insurance scores to set rates. Drivers with poor credit pay considerably higher premiums on average compared to good credit.
Coverage Limits and Deductibles
Selecting lower liability limits, declining physical damage options and choosing high deductibles brings rates down. But it also shifts financial risk to you.
Gender
Statistically, young male drivers pay more on average compared to females due to higher claims rates and driving aggression markers. The difference evens out around age 25.
Marital Status
Married drivers generally pay less than single drivers. Having multiple policies with one partner can also lead to multi-policy discounts.
Annual Mileage
Drivers with high yearly mileage have increased accident exposure so pay higher rates. Low mileage drivers save with discounts of 5-15%.
Effective Ways to Save on Car Insurance
While some risk factors are fixed, like age and location, there are still ways to minimize premium costs through smart policy decisions and shopping strategies.
Compare Quotes From Multiple Providers
Rates for the same driver can vary $1,000+ between insurers. Comparison shopping among national and local companies can uncover major savings opportunities. Obtain quotes from at least 5 insurers when possible.
Take Defensive Driving Courses
Completing an approved defensive driving program saves 5-15% for 3 years based on state regulations. Courses teach skills to avoid accidents and traffic violations.
Raise Deductibles to $500 or $1,000
Accepting a higher deductible amount reduces premiums substantially while still offering protection from major expenses exceeding the deductible.
Drop Comprehensive and Collision on Old Cars
Dropping optional physical damage coverage on older low-value vehicles saves significantly once repairs costs outweigh a car's value.
Inquire About All Available Discounts
Taking advantage of discounts like good driver, defensive driving, low mileage, affinity group, multi-policy, and anti-theft can help trim auto insurance costs 5-30% or more.
Improve Your Credit Score
Good credit translates to lower premiums. Pay bills on time, lower debts, correct errors on your credit report and monitor your score.
Purchase a Car With Great Safety Ratings
Vehicles with top safety picks have cheaper insurance rates on average compared to poorly rated models.
Increase Liability Limits If Assets at Risk
If you have significant assets to protect, consider higher liability limits above state minimums for better coverage from lawsuits.
Bundle Home and Auto Policies
Combining multiple insurance policies with one provider earns multi-policy discounts of up to 20% off total premiums.
Average Car Insurance Rates by Company
Auto insurance is a competitive market with over 200 companies providing coverage options across the country. Here are estimated sample average annual rates for major insurers based on a profile of a 40-year old driver with a clean record insuring a 2018 Honda Civic EX in Indianapolis, IN with 100/300/100 liability limits and $500 deductibles for collision and comprehensive.
Largest National Brands
| Company | Average Annual Premium |
|---|---|
| State Farm | $1,233 |
| Geico | $1,148 |
| Progressive | $1,571 |
| Allstate | $1,810 |
| USAA* | $933 |
| Liberty Mutual | $1,996 |
| Farmers | $1,573 |
| Nationwide | $1,258 |
*USAA restricted to military families
Large Regional Brands
| Company | Average Annual Premium |
|---|---|
| Auto-Owners | $1,285 |
| Esurance | $1,540 |
| The Hartford | $1,330 |
| Safeco | $1,309 |
| Travelers | $1,478 |
| 21st Century | $2,059 |
Smaller Local Companies
| Company | Average Annual Premium |
|---|---|
| Indiana Farm Bureau | $832 |
| Meridian Security | $1,163 |
| GEICO Advantage | $1,111 |
| Indiana Farmers Mutual | $1,210 |
| Shelter Insurance | $1,517 |
| American Family | $1,298 |
| Erie Insurance | $1,242 |
| Auto-Owners | $1,285 |
As shown, smaller regional and local insurers compete effectively on premium pricing in many states while offering excellent customer service and local expertise. Comparison shopping is essential to finding the best rate.
The Bottom Line
While rates are guided by your risk profile and location, substantial savings are possible through smart shopping and policy choices. Spend time reviewing coverage options, comparing insurer pricing, taking advantage of discounts and optimizing deductibles for your budget. Maintaining a great driving record and credit score also keeps premiums affordable.
With a proactive approach, drivers can effectively balance tailored protection and cost when selecting an auto insurance policy. Shopping around, adjusting physical damage coverage, and securing all available discounts makes finding the right premium fit possible.
FAQs
How much does minimum coverage car insurance cost per month?
The cost of minimum coverage car insurance can vary depending on factors such as your location, driving record, and the type of car you drive. According to Bankrate, the average cost of minimum coverage car insurance in Texas is $53 per month.
How does a bad driving record affect car insurance costs?
A bad driving record, such as a history of accidents or traffic violations, can increase car insurance costs. Insurance companies consider drivers with a bad driving record to be higher risk, which can lead to higher premiums.
What factors have the biggest impact on car insurance rates?
Several factors can impact car insurance rates, including your age, location, driving record, the type of car you drive, and the coverage options you choose. Insurance companies use these factors to determine your level of risk and calculate your premiums accordingly.
How can a teenager get cheaper car insurance rates?
Teenagers can potentially get cheaper car insurance rates by maintaining good grades, taking a driver's education course, driving a safe car, and being added to their parents' insurance policy. Insurance companies may also offer discounts for young drivers who meet certain criteria.
What is the average cost of car insurance for a 20-year-old?
The average cost of car insurance for a 20-year-old can vary depending on factors such as location, driving record, and the type of car they drive. According to The Zebra, the average cost of car insurance for a 20-year-old is $2,784 per year. However, rates can vary significantly based on individual circumstances.
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