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How Much Is Auto Insurance?

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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

  • Age
  • Gender (except where prohibited by law)
  • Marital status
  • Driving history
  • Credit score (except where prohibited by law)
  • Gap in coverage
  • Frequency/amount of driving
  • Make/model
  • Speed and performance
  • Size
  • Safety features
  • Age
  • 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

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.

Gender

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.

Marital Status

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.

Credit Score

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.

Driving History

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.

Driving Habits

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
  • Virginia
  • Maine
  • Iowa
  • Idaho
 

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.

No-Fault States

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.

USAA

GEICO

Progressive

  • 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

State Farm

AAA

Nationwide

  • 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.

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Bad Credit

If You Want Consumers to Lose, Network Regulation is a Must – Digital Transactions

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After the current U.S. Congress was sworn in, a predictable chorus of merchants, lobbyists, and lawmakers demanded new interchange price caps and other government mandates to decrease credit card interchange fees for merchants. The tired attacks on credit cards are an easy narrative that focuses almost exclusively on the cost side of the ledger, while completely ignoring the cards’ important role in the economy and the regressive effects of interchange regulation. 

To lawmakers blindly acting on behalf of retailers, regulation is a brilliant idea—regardless of how it affects their constituents. For decades, they have promised these interventions would eventually benefit consumers. But the lessons from the Durbin Amendment in the United States and price cap regulation in Australia is clear. Although some policymakers bemoan the current economic model, arbitrarily “cutting” rates for the sake of cuts completely ignores the economic reality that as billions of dollars move to merchants, billions are lost by consumers. 

For the uninitiated, let’s break down what credit interchange funds: 1) the cost of fraud; 2) more than $40 billion in consumers rewards; 3) the cost of nonpayment by consumers, which is typically 4% of revolving credit; 4) more than $300 billion in credit floats to U.S. consumers; and 5) drastically higher “ticket lift” for merchants. 

Johnson: “To lawmakers blindly acting on behalf of retailers, regulation is a brilliant idea—regardless of how it affects their constituents.”

These are just some of the benefits. If costs were all that mattered, American Express wouldn’t exist. Until recently, it was by far the most expensive U.S. network. Yet, merchants still took AmEx because they knew the average AmEx “swipe” was around $140, far more than Visa and Mastercard. 

Put simply, for a few basis points, interchange functions as a small insurance policy to safeguard retailers from the threat of fraud and nonpayment by consumers. Consider the amount of ink spilled on interchange when no one mentions that the chargeoff rate for issuing banks on bad credit card debt exceeds credit interchange.

Looking abroad, interchange opponents cite Australia, which halved interchange fees nearly 20 years ago, as a glowing example of how to regulate credit cards. In truth, Australia’s regulations have harmed consumers, reduced their options, and forced Australians to pay more for less appealing credit card products. 

First, the cost of a basic credit card is $60 USD in many Australian banks. How many millions of Americans would lose access to credit if the annual cost went from $0 to $60? Can you imagine the consumer outrage? 

In a two-sided market like credit cards, any regulated shift to one side acts a massive tax on the other. For Australians, the new tax fell on cardholders. There, annual fees for standard cards rose by nearly 25%, according to an analysis by global consulting firm CRA International. Fees for rewards cards skyrocketed by as much as 77%.

Many no-fee credit cards were no longer financially viable. As a result, they were pulled from the market, leaving lower income Australians, as well as young people working to establish credit, with few viable options in the credit card market.

Even the benefits that lead many people to sign up for credit cards in the first place have been substantially diluted in Australia because of the reduction of interchange fees. In fact, the value of rewards points fell by approximately 23% after the country cut interchange fees.

Efforts to add interchange price caps would have a similar effect here in the U.S. A 50% cut would amount to a $40 billion to $50 billion wealth transfer from consumers and issuers to merchants. For the 20 million or so financially marginalized Americans, what will their access to credit be when issuers find a $50 billion hole in their balance sheets? 

The average American generates $167 per year in rewards, according to the Consumer Financial Protection Bureau. Perks like airline miles, hotel points, and cashback rewards would be decimated and would likely be just the province of the rich after regulation. Many middle-class consumers could say goodbye to family vacations booked at almost no cost thanks to credit card rewards.

As the travel industry and retailers fight to bounce back from the impact of the pandemic, slashing consumer rewards and reducing the attractiveness of already-fragile businesses is the last thing lawmakers and regulators in Washington should undertake.

Proposals to follow Australia’s misguided lead in capping interchange may allow retailers to snatch a few extra basis points, but the consequences would be disastrous for consumers. Cards would simply be less valuable and more expensive for Americans, and millions of consumers would lose access to credit. University of Pennsylvania Professor Natasha Sarin estimates debit price caps alone cost consumers $3 billion. How much more would consumers have to pay under Durbin 2.0?

Members of Congress and other leaders should learn from Australia and Durbin 1.0 to avoid making the same mistake twice.

—Drew Johnson is a senior fellow at the National Center for Public Policy Research, Washington, D.C.

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Increase Your Credit Score With Michael Carrington

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More than ever before, your debt and credit records can negatively impact you or your family’s life if left unmanaged. Sadly, many Americans feel entirely helpless about their credit score’s present state and the steps they need to take to fix a less-than-perfect score. This is where Michael Carrington, founder of Tier 1 Credit Specialist, comes in. Michael is determined to offer thousands of Americans an educated, informed approach towards credit restoration.

Michael understands the plight that having a bad credit score can bring into your life. His first financial industry job was working as a home mortgage loan analyst for one of the nation’s largest lenders. Early on, he had to work a grueling schedule which included several jobs seven days a week while putting in almost 12-hour days to make $5,000 monthly to get by barely.

“I was tired of living a mediocre life and was determined to increase the value that I can offer others through my knowledge of the finance industry – I started reading all of the necessary books, networking with industry professionals, and investing in mentorship,” shares Michael Carrington. “I got my break when I was able to grow a seven-figure credit repair and funding organization that is flexible enough to address the financial needs of thousands of Americans.”

With his vast experience in the business world, establishing himself as a well-respected business leader, Michael Carrington felt he had the power to help millions of Americas in restoring their credit. Michael learned the FICO system, stayed up to date on the Fair Credit Reporting Act (FCRA), found ways to improve his credit score, and started showing others.

The Tier 1 Credit Specialist uses a tested and proven approach to educate their clients on everything credit scores. Michael is leveraging his experience as a home mortgage professional, marketing executive, and global business coach to inform his clients. He and his team take their time to carefully go through their client’s credit records as they try to find the root of their problem and find suitable financial solutions.

The company is changing lives all over America as it helps families and individuals to repair their credit scores, gain access to lower interest rates on loans and get better jobs. What Tier 1 Credit Specialists is offering many Americans is a chance at financial freedom.

Michael Carrington has repaired over $8 million in debt write-ups and has helped fund American’s with over $4 million through thousands of fixed reports. “I credit our success to being people-focused,” he often says. “The amount of success that we create is going to be in direct proportion to the amount of value that we provide people – not just our customers – people.”

Because of its ‘people-focused goals, the Tier 1 Credit Specialist is determined to help millions of Americans achieve financial literacy. It is currently receiving raving reviews from clients who are completely happy with the credit repair solutions that the company has provided them.

Today, Michael Carrington is continuing with a new initiative to serve more Americans who suffer from bad credit due to little or no access to affordable resources for repair.

The Tier 1 Credit Socialist brand is changing the outlook of many families across America. To do this, the company has created an affiliate system that will provide more people with ways of earning during these tough economic times.

As a well-respected international business leader and entrepreneur with numerous achievements to his name Michael Carrington aims to help millions of Americans achieve the financial freedom, he is experiencing today. Tier 1 Credit Socialist is one of the most effective credit repair brands on the market right now, and they have no plans for slowing down in 2021!

Learn more about Michael Carrington by visiting his Instagram account or checking out the Tier 1 Credit Specialist website.

Published April 17th, 2021



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Does Having a Bank Account With an Issuer Make Credit Card Approval Easier?

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Better the risk you know than the one you don’t.

When it comes to personal finance, nothing is guaranteed. That goes double for credit. That’s why, no matter how perfect your credit or how many times you’ve applied for a new credit card, there’s always that moment of doubt while you wait for a decision.

Issuing banks look at a wide range of factors when making a decision — and your credit score is only one of them. They look at your entire credit history, and consider things like your income and even your history with the bank itself.

For example, if you defaulted on a credit card with a given bank 15 years ago, that mistake is likely long gone from your credit reports. To you and the three major credit bureaus, it is ancient history. But banks are like elephants — they never forget. And that mistake could be enough to stop your approval.

But does it go the other way, too? Does having a bank account that’s in good standing with an issuer make you more likely to get approved? While there’s no clear-cut answer, there are a few cases when it could help.

A good relationship may weigh in your favor

Credit card issuers rarely come right out and say much about their approval processes, so we often have to rely on anecdotal evidence to get an idea of what works. That said, you can find a number of stories of folks who have been approved for a credit card they were previously denied for after they opened a savings or checking account with the issuer.

These types of stories are more common at the extreme ends of the card range. If you have a borderline bad credit score, for instance, having a long, positive banking history with the issuer — like no overdrafts or other problems — may weigh in your favor when applying for a credit card. That’s because the bank is able to see that you have regular income and don’t overspend.

Similarly, a healthy savings or investment account with a bank could be a helpful factor when applying for a high-end rewards credit card. This allows the bank to see that you can afford its product and that you have the type of funds required to put some serious spend on it.

Having a good banking relationship with an issuer can be particularly helpful when the economy is questionable and banks are tightening their proverbial pursestrings. When trying to minimize risk, going with applicants you’ve known for years simply makes more sense than starting fresh with a stranger.

Some banks provide targeted offers

Another way having a previous banking relationship with an issuer can help is when you can receive targeted credit card offers. These are sort of like invitations to apply for a card that the bank thinks will be a good fit for you. While approval for targeted offers is still not guaranteed, some types of targeted offers can be almost as good.

For example, the only confirmed way to get around Chase’s 5/24 rule (which is that any card application will be automatically denied if you’ve opened five or more cards in the last 24 months) is to receive a special “just for you” offer through your online Chase account. When these offers show up — they’re marked with a special black star — they will generally lead to an approval, no matter what your current 5/24 status.

Credit unions require membership

For the most part, you aren’t usually required to have a bank account with a particular issuer to get a credit card with that bank. However, there is one big exception: credit unions. Due to the different structure of a credit union vs. a bank, credit unions only offer their products to current members of the credit union.

To become a member, you need to actually have a stake in that credit union. In most cases, this is done by opening a savings account and maintaining a small balance — $5 is a common minimum.

You can only apply for a credit union credit card once you’ve joined, so a bank account is an actual requirement in this case. That said, your chances of being approved once you’re a member aren’t necessarily impacted by how much money you have in the account.

In general, while having a bank account with an issuer may be helpful in some cases, it’s not a cure-all for bad credit. Your credit history will always have more impact than your banking history when it comes to getting approved for a credit card.

For more information on bad credit, check out our guide to learn how to rebuild your credit.

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