If you have a car, you need auto insurance to protect you from sudden, and possibly enormous, financial costs in case you’re involved in an accident. According to MyCarInsurance123.com, the national average monthly car insurance premium is $135. That works out to $1,625 per year.
While knowing how much car insurance costs on average can be insightful, it’s important to understand the factors insurers look at when setting rates. That way, you can figure out how to get the coverage you need at a price that fits your budget.
We’ve researched the top U.S. auto insurance companies and provided our findings in our review of the best car insurance companies for 2020.
Fill out the form to get personalized quotes for auto insurance coverage and see how much it is for you:
How Auto Insurance Companies Set Their Premiums
Car insurance rates vary widely based on many factors related to a driver, vehicle, and location. Each company emphasizes some factors more than others, which means insurers may quote the same driver vastly different rates for the same coverage. That’s why it’s important to get multiple quotes before you purchase a policy.
Factors Related to the Driver
Factors Related to the Vehicle
Factors Related to Location
- Gender (except where prohibited by law)
- Marital status
- Driving history
- Credit score (except where prohibited by law)
- Gap in coverage
- Frequency/amount of driving
- Speed and performance
- Safety features
- Severe weather/natural disasters
- Population density/congestion
- State laws on required coverage
- No-fault state laws
Personal Factors That Can Affect Your Insurance Premiums
Insurers look at many factors to decide how much auto insurance costs. Some of those factors are beyond your control.
Age has a significant effect on car insurance rates. Drivers 25 and under are generally considered riskier than middle-aged drivers because they don’t have much experience. Rates are highest for teen drivers, then they begin to fall in the early 20s as drivers gain more experience behind the wheel. Premiums tend to be lowest for drivers in their 40s, 50s, and 60s, then climb from the age of 70 onward.
A full-coverage policy for a 20-year-old with a clean driving record will cost about $3,000 per year. A 25-year-old with a good driving record can expect to pay around $2,000 in annual premiums for a full-coverage policy. Insurance rates for younger drivers can vary due to several other factors, such as the type of vehicle and zip code.
Young males usually pay higher insurance premiums than females of the same age. That’s not always the case, however, since California, Hawaii, Massachusetts, Pennsylvania, North Carolina, Montana, and some parts of Michigan prohibit auto insurance companies from considering gender when setting premiums.
Your marital status can affect your insurance rates. Married people are statistically less likely to be involved in car accidents than single people. This may be because married drivers think about the safety and financial security of their family members more than single drivers and therefore tend to be more cautious.
In addition, married couples typically enjoy lower premiums because they have car insurance policies that cover multiple vehicles and drivers. They also frequently bundle policies for auto, homeowners, and life insurance through the same company. All those actions can make customers eligible for discounts.
You may be surprised to learn that your credit score can affect the amount you pay for car insurance. Most insurers look at a driver’s credit score when setting premiums (except in California, Hawaii, and Massachusetts, where the practice is illegal). Drivers with lower credit scores tend to file more insurance claims than drivers with better credit.
Your accident history and any tickets you have received can affect your auto insurance rates. Multiple tickets or citations for serious offenses, such as reckless driving or DUI, can cause your insurance rates to skyrocket. Yahoo! Finance cited a study by Insurance.com that found that a DUI caused insurance premiums to rise by 79 percent on average, while a ticket for reckless driving led to a 73-percent rate hike.
Gap In Coverage
If your car insurance coverage lapsed, your rates will most likely be higher when you get a new policy. You might not have to pay higher premiums, however, if your coverage lapsed because you were deployed for military service.
How often and how far you drive your car can influence your insurance premiums. The more you drive, the greater the chance that you will get into an accident. Where you park your car is also important since your vehicle will be safer if it’s parked in a garage than it would be on the street or in a shared parking lot.
How Your Car Affects Your Insurance Costs
People who buy fast cars are more likely to get into accidents, so they pay higher auto insurance premiums.
Sedans, minivans, and SUVs are considered more sensible vehicles, and people who drive them generally have more affordable insurance rates than owners of sports cars.
Larger cars are safer in accidents since they absorb an impact better than smaller vehicles.
Safety and security devices, such as anti-lock brakes and anti-theft systems, can lower insurance rates.
Used cars cost less to insure than new ones. Take those factors into consideration if you’re thinking about buying a car in the near future.
How Your Location Influences Your Car Insurance Rates
Car insurance premiums vary by location. Here is a list of average auto insurance rates broken down by state. The table below shows the places with the highest and lowest average auto insurance premiums.
Most Expensive States to Insure a Car
Least Expensive States to Insure a Car
- North Carolina
Some parts of the U.S. are more prone to severe weather and natural disasters. That means drivers in those locations are more likely to be involved in accidents than those who live in some other parts of the country. Accidents are more common in densely populated locations, so drivers in urban areas tend to pay higher premiums than those in more sparsely populated places. Lower-than-average income and a high percentage of uninsured motorists can raise average rates.
Required And Optional Insurance Coverage
The types of car insurance coverage that are required depend on the state where you live. New Hampshire and Virginia don’t require auto insurance.
- In New Hampshire, uninsured residents can be held responsible for up to $50,000 in liability and up to $25,000 in property damage for an accident or have their license and registration suspended.
- In Virginia, residents can pay the state $500 per year instead of purchasing car insurance, but that doesn’t provide any coverage if a driver causes an accident.
In states where auto insurance is required, laws require minimum amounts of coverage in specific categories. We want to stress that it’s usually not a good idea to just buy the bare minimum. That might save you money each month, but if a serious accident resulted in damage or injuries beyond your limits, you would be on the hook for the difference. That could put your other assets, such as your home, as well as your family’s financial security, at risk.
When it comes to optional coverage, you need to decide what makes sense for you. For example, personal injury protection (PIP) will cover medical bills for you and your family if you get injured in a car accident. It can also cover funeral costs and lost wages.
If you have a car loan or lease, you’re required to have collision and comprehensive coverage.
- Comprehensive covers theft, vandalism, and damage from other causes, excluding crashes.
- Collision covers damage to your car as a result of a crash.
If comprehensive and collision coverage aren’t required, it might not be a good idea to pay for them if you don’t drive your car often or if it isn’t worth much.
In some states, known as no-fault states, each driver injured in an accident must file a claim with his or her own insurance company, regardless of which driver was at fault. In those states, PIP coverage is required.
Several variations on the no-fault model exist in different states. The right to sue for injuries and pain and suffering is restricted to varying degrees.
The following states and territory have no-fault insurance laws. In states marked with an asterisk (*), no-fault auto insurance is optional. That means drivers can choose a no-fault insurance policy or a traditional tort liability policy that allows parties injured in a car accident to sue the party found to be at fault.
Premiums for no-fault insurance coverage vary based on the characteristics of the driver, vehicle, and state. State laws have different minimum amounts of PIP coverage required.
Michigan requires drivers to have unlimited PIP coverage and $1 million in property protection insurance. Michigan also has car insurance premiums that are much higher than the national average.
Ways To Save On Car Insurance
If you’re currently paying high car insurance premiums, there are several steps you can take to lower your bills:
Ask If You Qualify For Discounts
Car insurance companies offer various discounts to save customers money. You might qualify for lower premiums if you’re a safe driver, a homeowner, a good student, a military member or veteran, or a member of a particular organization. You could also get lower premiums by bundling multiple policies, such as auto, homeowners, and life insurance, through one company.
Buy A Safer And/Or Used Car
If you plan to buy a new car, look for one that is equipped with safety features. Avoid a sports car and consider buying a used vehicle.
Drive Safely And Limit Your Driving
Focus on driving safely. If you have a spotty driving history, you might want to choose an insurance company that will allow you to install a tracker in your vehicle that monitors your driving habits, so you can qualify for safe driving discounts.
Driving a lot puts you at higher risk for an accident. Using public transportation, carpooling, or moving closer to work could lower your premiums.
Improve Your Credit
If you have bad credit, focus on paying your bills on time and lowering your credit card balances. If you have high interest rates, a balance transfer card or debt consolidation loan could help you eliminate your debt faster.
Only Pay For Coverage You Need
Consider eliminating coverage you don’t need. Just don’t focus so much on saving money that you leave yourself underinsured.
Raise Your Deductible
The deductible is the amount of money you will have to pay out of pocket before your insurance company will give you money to settle a claim. Deductibles are typically $500 or $1,000, but they can be higher or lower. A higher deductible usually means lower monthly premiums. Raising your deductible might save you money each month, but you should only make that change if you have enough money in an emergency fund to cover the deductible if you get into an accident.
Compare Quotes From Several Insurers
All auto insurance companies consider a number of factors when setting premiums. Since each company assigns a different amount of importance to each of those factors, you could receive a wide range of quotes for the same coverage. This is why it’s important to get quotes from several companies before you choose a policy.
Should You And Your Spouse Combine Auto Insurance Coverage?
If both you and your spouse have good driving records, combining your coverage on one insurance policy could lower your premiums since many car insurance companies give multi-car discounts.
Compare your existing policies and get quotes for a combined policy from several insurers. Some insurance companies allow domestic partners, as well as married couples, to have joint policies.
If one of you has a good driving record and the other has had several accidents or received multiple tickets, you should talk to insurers about whether you would be better off with a joint policy or two separate ones. In some cases, combining coverage would cost less, especially if you got a multi-car discount, while in other circumstances you’d save money with separate policies.
Note that even if you got two policies, insurers would consider both your driving records since one of you might drive the other’s car and get into an accident. The person with the better driving record might be able to exclude the other spouse from the policy to keep the rates down, but the policy wouldn’t pay for damage or injuries if the non-covered spouse drove the car and caused an accident.
Comparison of Top Insurance Providers
We’ve looked at many of the leading auto insurance companies in the U.S. and believe these are among the best. Contact individual companies to get specific quotes for your vehicle, location, and situation.
- 5.0 stars overall
- Best for current and former members of the military and their families
- Lowest premiums in many states
- 4.5 stars overall
- Best for students and military
- Known for competitive rates and discounts
- 4.5 stars overall
- Gives customers several ways to earn discounts
- Convenient online policy management
- 4.5 stars overall
- Best for students
- Largest U.S. auto insurer
- Offers apps that that customers earn discounts
- 4.0 stars overall
- Regional clubs
- Insurance coverage available to customers with roadside assistance memberships
- 4.0 stars overall
- Best for senior citizens
- Competitive rates
- Several discounts available
In our opinion, USAA is the best car insurance company, but its coverage isn’t available to everyone. Policies are only issued to individuals who have served in the military and members of their families. USAA’s high customer satisfaction earned it an A++ rating from AM Best and the top spot on J.D. Power’s 2019 Auto Claims Satisfaction Study. In addition, USAA offers the lowest rates in many states, as well as discounts for safe drivers, good students, multi-vehicle policies, and other reasons.
GEICO is a top choice for many drivers because of its competitive prices. It also offers money-saving discounts for current members of the military and veterans, students, loyal customers, and good drivers, as well as drivers whose vehicles are equipped with anti-theft devices. GEICO received an A++ rating from AM Best and an A+ rating from the Better Business Bureau.
Progressive has earned an A+ rating from AM Best. It offers customers several ways to earn discounts. The deductible savings bank reduces the deductible by $50 for each six-month period without a claim. The company’s Snapshot app can monitor customers’ driving and reward safe drivers with lower rates. Customers who bundle policies can enjoy lower premiums.
State Farm is the largest U.S. car insurance company. It has four insurance apps that let customers earn discounts, manage their policies, and submit claims. State Farm also offers a variety of discounts to save customers money.
How To Find Affordable Auto Insurance
It’s difficult to give a straight answer to the question “How much is car insurance?” Insurance companies consider many factors related to a driver, a vehicle, and the location when setting premiums. Each insurer has its own policies and considers some factors more important than others. If you need car insurance, you should request quotes from several companies and compare them to figure out which insurer can provide you with the best coverage at the most affordable rate.