Car insurance is required for most U.S. drivers. You may wonder how much you will pay for a policy because it is a mandatory purchase. Although it is impossible to predict how much car insurance will cost you, you can find out what factors affect your car insurance rates. This information will help you determine which individual rating factor may increase or decrease the amount you pay. Requesting quotes from multiple companies is the best way to find out how much car insurance will cost.
Understanding how insurance policies for car are rated can help you understand your quote and reduce your premium. Bankrate’s experts explain how your personal rating factors affect car insurance. They also discuss the different coverages that can impact what you pay, and possible ways to save money.
What is the best way to determine your car insurance rate
The insurance company collects information about you and then uses that information to calculate your car insurance rate. Different companies view your rating factors in a different way. For example, one company may penalize speeding tickets more severely than another. Your rate may be drastically different from that of a friend, family member or even the average national rate. These are some of the main factors that affect how much you pay for auto insurance premium:
- Your driving record: A higher premium will be if you have more traffic violations and accidents on your record. For example, a DUI can double your premiums. Even a simple speeding ticket could cause more than 20% rate increases. You will also likely pay more if you are a novice driver with a poor driving record.
- Your car’s use: How often you drive your car can have an impact on your insurance premiums. You will pay more if you drive a lot or spend a lot of time behind a wheel. You might be able to save money if you’re a frequent driver with usage-based insurance.
- Your location: The state or even your ZIP code will affect the cost of your car insurance. Urban drivers may have to pay more because they are more likely to be in an accident. Your insurance could be affected by the severity of claims, vehicle theft, vandalism, and other factors such as accidents. You will also be charged for parking your car in an area other than the street.
- Your age: Younger drivers are more likely than older drivers to be involved in an accident. You will pay more for car insurance if you are younger than 25. Rates can also rise after 70.
- Your gender: Statistics show that women are statistically less likely than men to be involved in serious traffic accidents. Females pay lower premiums for car insurance.
- Credit score: How your credit scores can impact your car insurance premium. Low credit drivers may file more claims than those with better credit scores. To compensate for this risk, insurance companies will charge you more for a lower credit score. Some states prohibit the use of credit as a rating factor.
- You can choose the type and extent of coverage that you want: Although you must have at least the minimum coverage required by your state to drive legally, it is possible to buy optional or higher limits. Although your premium will be higher if you add endorsements or increase the limits, the coverage offered could compensate.
- You may qualify for discounts: Many car insurers offer discounts that can help you save money. For example, you might get savings when you bundle home and auto insurance with the same company. Or you could receive a discount for signing-up for paperless statements. Certain discounts will have a greater impact on your premium than others. You might be able to maximize savings by talking with your agent or company regarding discounts.
While each factor can play a part in the price of your policy, every insurer weighs them differently. It might be possible to get quotes from multiple companies in order to find the right coverage at a fair price.
What affects the coverage type on your car insurance rate
Car insurance policies can be bought in bundles with many coverages. Most of these coverages are available in varying limits. The more coverages and higher limits you select, the more expensive your auto insurance policy will be.
Minimum coverage
A policy can include multiple coverage types. While most states require minimum coverage, each state has its own insurance laws. Each state determines what coverage you need and how much. Although they are the most affordable option for car insurance, minimum coverages in states can be less expensive than other options. However, you will not be financially protected if an accident occurs.
Depending on where you live, the minimum state coverage is usually “liability only”. You can choose to buy liability limits that are higher than your state’s minimum. Your state may require $25,000 bodily injuries per person, $50,000 per accident, and $25,000 property damage. This is often represented by 25/50/25. You can also choose to buy 100/300/50 limits. This would usually cost more.
Full coverage
Full coverage can also be purchased, which provides comprehensive and collision coverage. These coverages provide protection against damage to your vehicle due to a variety of circumstances, such as theft, vandalism and hitting an object or vehicle. To protect the lender’s assets, you will need to buy full coverage if you have a loan. Your premium will increase if you purchase more coverage than the minimum.
Additional coverages
Some coverages can be canceled at any time. Your state may require you to have uninsured or underinsured motorist coverage. However, this coverage is generally optional. It covers your injuries and damages to your vehicle if you are struck by someone without insurance. You can also choose to add roadside assistance, gap insurance, new car replacement, car rental coverage, ridesharing coverage, and car rental coverage. Each company offers a different selection of optional coverages.
You can customize your car insurance. You can choose to have minimum coverage in your state, or you could buy full coverage and maintain minimum liability levels. Or you could purchase liability-only coverage with higher limits. And you can add optional coverages. It can be difficult to estimate the cost of these coverages as each company has a different pricing structure. The general rule is that the higher the coverage you choose and the higher the limits, the higher your car insurance costs.
How to calculate your car insurance quote
To find out how much car insurance you should purchase, review the average price of car insurance for your state. This will give you an idea of the cost of a policy in your region. Getting quotes from multiple companies will allow you to see how your rating factors affect your rates.
You may be able get an estimate of the cost of car insurance by considering your rating factors and the type of coverage that you require.
- Determine how much insurance coverage you require. It might help to determine what coverage you require and which optional coverages are available before you start shopping for insurance. Talking to an agent may be helpful if you have any questions.
- Consider your personal circumstances. You should expect to pay more insurance if you have a teenage driver to insure, have one to three accidents or tickets on you record, are convicted of a DUI, or live in an area that is known for car crashes. Your rating factors can help you find companies that cater to drivers like yourself.
- Find out what discounts are available. It’s a smart move to get quotes from multiple companies if you have an auto and home policy. You might save money if you have a teenage driver.
Each company’s rating system makes it difficult to estimate how much insurance you will pay. Understanding the average cost of insurance in your area and your rating factors can help you to estimate the price of your insurance and help you compare quotes from different insurance companies.
Consider these factors when comparing quotes
Compare apples-to-apples car insurance quotes when comparing. Comparing quotes for different levels will not give an accurate picture of which company offers a lower premium. Each company is unique so you might not get the exact same quote. However, the closer the quotes are, the more accurate the comparison.
It is also worth comparing any policy features that you are interested in, such as a mobile app and company-specific discounts. This could help you save money. You should also consider the financial strength of your company from AM Best, as well as customer satisfaction scores from J.D. Power.
Questions frequently asked
Is it really so difficult to estimate my insurance costs?
Your location, driving record, gender, age and vehicle type all play into your auto insurance premium. You also have to consider the coverages you select and the discounts that you may be eligible for. Each insurance company also has its own rating system, which weighs each rating factor in a different way. Although you may be able estimate how much you should pay by looking at the average state premiums and understanding your rating factors, it is impossible to accurately determine how much your insurance will cost. It is best to get quotes from different companies.
How can I determine how much coverage I should buy?
At least the minimum required coverages and levels in your state will be purchased. This is not something to worry about. Even if you are able to get estimates online, the software of a company should not allow you purchase less than the state’s minimum limits. To fully protect your lender’s assets, you will need to purchase full coverage if you have a vehicle loan or lease. This includes collision and comprehensive. Talking to a licensed agent can help you determine the coverages, levels and policy features that are available or which discounts to take advantage. A licensed agent can help you assess your situation and recommend coverages and levels.
How much does American car insurance cost?
The U.S. average minimum coverage car insurance premium is $565 per annum, while the average full coverage premium is $1,674 annually. Your rating factors will impact how much your premium may vary.
