Your Auto Insurance Rates
It’s safe to say that you’re paying too much for auto insurance. You may have signed up for your spouse’s or parent’s plan without thinking. Or, you may have gone with a locally advertised insurance company or the first search results that popped up on Google.
This is the way most people choose auto insurance. It’s straightforward, effortless, and makes sense. But putting in a little extra effort could pay big in the long run.
Comparing auto insurance providers and weighing risk factors could shave hundreds of dollars off your annual premium.
How much should you pay for auto insurance?
This is an excellent question with no easy answer. There are countless factors that determine how much you will pay for auto insurance, but one thing is for sure—if you haven’t researched your risk factors, you’re probably paying too much.
Based on Insure.com’s 2014 analysis of auto insurance premiums, the top three most expensive states for auto insurance are:
What about the cheapest? If you live in Ohio or Maine, then you’re in luck. Ohio has the cheapest auto insurance rates in all 50 states, and Maine has the second lowest rates.
Car insurance rate fluctuations throughout the US hinge on a number of variables, including traffic, urban versus rural regions, state insurance stipulations, percentage of uninsured drivers, number of auto insurance providers, and rate of auto theft.
If you’d like to put a dollar amount To this damage:
Average annual auto insurance premiums in Michigan hit a whopping $2,551
West Virginia follows in the number two slot at $2,518/year.
Georgia drivers can expect to pay $2,201 average.
At the bottom of the list:
According to CNNMoney, there’s only one way for an auto insurance provider to quote auto insurance rates: based on risk.
This risk is essentially an educated guess. There’s no way for an insurance provider to predict your skill and safety level as a driver. Risk will be statistically assessed based on a collection of risk factors, including but not limited to age, sex, marital status, driving history, and type of vehicle.
Just as important to remember is the fact that not all insurers calculate risk with the same formula. Risk is a guess. It’s anyone’s game.
Comparison shopping insurance providers is the only way to take your risk assessment into your own hands to find the cheapest market rates.
Insure.com’s survey blames Michigan’s sky-high auto insurance rates on the generous personal injury protection benefits required in the state. You see, Michigan is a no-fault auto insurance state. This means that every single driver on the road must purchase personal injury protection (PIP) within their auto insurance policy in order to legally drive.
West Virginia doesn’t have the same no-fault laws as Michigan, but it has its own share of problems: specifically, deer. West Virginia is a state with vast rural regions. State Farm data indicates that drivers are statistically more likely to hit a deer in West Virginia than any other state.
Georgia auto insurance prices are driven up by a number of factors, including Atlanta traffic, a rising number of personal injury lawsuits, and a surge in uninsured and underinsured motorist claims.
Here are a few important facts to remember about your auto insurance rates:
- Drivers are required to have valid insurance in almost all 50 states.
- The average driver will claim an accident on their record every 17.9 years.
- Car insurance premiums normally drop at the age of 25.
- Fender benders are the most common auto insurance claim, followed by theft.
16%of drivers may be uninsured at any point in time.
You can be the most careful driver in the world, but that does not make you immune to car accidents on the road. Things like weather and unpredictable drivers mean you are always vulnerable. There are cheap auto insurance options without deposits, so driving uninsured is never the answer.
The Ohio Department of Insurance, home to the cheapest
auto insurance rates in the nation, explains,
“Insurance is a product that relies on the spreading of risk among diverse individuals or groups in order to operate. All insurance companies use data and statistics to predict levels of risk for various individuals or groups. This risk calculation information is also used to develop rating plans. Generally, higher risk factors will result in higher premium rates and lower risk factors will drive premiums lower.”
Every time you get behind the wheel, you never know what is going to happen.
That’s precisely why auto insurance premiums are calculated based on a game of risk. Once you understand your specific auto insurance risk factors, your rate quote will no longer be a mystery.
In New Hampshire, drivers are required to provide proof of sufficient funds to pay for any injury or damage in an at-fault accident.
How to Calculate Your Auto Insurance Rates
Now to the nitty-gritty. You can use these guidelines to better understand how to calculate your auto insurance rates—and how to get the best deal:
Age ain’t nothing but a number, except when it comes to your auto insurance rates.
Average auto insurance rates depend upon age, as you may have noticed that auto insurance rates start dropping at the age of 25. DMV.org confirms,
“As auto insurance companies calculate your premiums, they may place a large stock in your age if you or another driver in your household is under 25 years of age or over 70.”
Sadly, this is not age discrimination. It’s all part of the auto insurance biz. Car insurance providers base their rates on solid statistics that indicate younger and senior drivers are more likely to get in accidents.
New drivers and teen drivers have been proven more dangerous on the road; the accident-related death rate per mile in the 16-to-19-year-old age bracket is three times higher than a 20-year-old driver.
This one is simple: Expensive cars cost more to replace in an accident.
If you’ve recently upgraded to a new vehicle, you can expect a auto insurance hike to follow. If you want to save money on auto insurance online, consider trading in your brand-new car for an older (and less sporty) model. Even if you do not own a car, you should still get insurance coverage to protect yourself when you drive another vehicle.
Adding a teen on to a auto insurance policy can hurt your wallet.
Fortunately, by the time they make it to college, you may be home free. Personal finance strategist Shannah L. Compton estimates that, “You can save as much as 10-20% off your rates if your kid decides to go to a college that is 100 miles or more away from your home.”
Why on earth would your credit score matter to your auto insurance provider?
In a nutshell, your credit history reflects your ability to pay on time. Insurance providers can use credit score data to determine rates in all states, except California, Hawaii, and Massachusetts. Your credit score is likely to reflect your auto insurance rate when moving up or down. Excellent credit can lower your premium by more than 30%. However, there are low income auto insurance options.
Liability auto insurance is the least expensive coverage option required in most states.
Liability coverage will cost less than full coverage insurance and may be a better choice for an older vehicle with a lower value. However, your lender may require you to carry full coverage insurance to protect the value of your car if you are still paying off a loan.
Full coverage, or comprehensive coverage, may include a number of policy customizations that depend on provider, such as collision, medical payment, custom parts and equipment, rental reimbursement, roadside assistance, and loan payoff coverage.
One auto insurance risk factor within your control is your driving history.
We all make mistakes, but it is to your advantage to keep your driving record as clean as possible. A reckless driving ticket can increase auto insurance rates by up to 22%; a first time DUI offense may result in a rate hike of 19%; a seemingly minor infraction like a speeding ticket 1-14 miles over the speed limit could increase rates by up to 11%.
When in doubt, carpool on your commute!
Not only does carpooling benefit the environment and reduce wear and tear on your vehicle, but taking public or alternate transportation instead of driving to work could lower auto insurance rates.
A one-way commute of 3 or fewer miles falls into the leisure driving category and will not affect rates; a one-way commute of 4 to 9 miles could increase auto insurance rates by several dollars; a significantly longer one-way commute of 20 miles or more could add $10 per month onto your policy.
Women are statistically seen as safer drivers.
Men may pay an estimated $15,000 more in total lifetime auto insurance than women, when similar age and income levels are factored in. The playing field is leveled when you consider that women are likely to pay more than men for health insurance on average.
Having a Baby
Babies are expensive, but they may prove beneficial to your auto insurance rates.
Parents are expected to be safer drivers and may trade in a sporty car for a minivan. This new practical driving attitude—and a car with a better safety rating—could reward you with lower auto insurance rates.
Every auto insurance provider is different.
Using their own specified criteria, each insurer will calculate auto insurance rates based on preferred data and company claim history. Again, auto insurance rate calculations will vary by provider based on multiple risk factors, making it imperative to compare quotes before signing on the dotted line.
Lapse In Coverage
Here’s another reason why it never pays to drive uninsured:
Even a small lapse in coverage can affect your auto insurance rates.
It may seem like a good idea to save money in the short-term by neglecting to renew your policy, but keep in mind—your next insurance provider will look at your coverage history when calculating your premium.
You could be labeled a high-risk driver for letting coverage lapse, indicating that you drove uninsured. A high-risk driver label means high-dollar coverage.
You’ve already learned that auto insurance rates can vary drastically by state.
Yet even if you reside in an inexpensive auto insurance state, your regional location could affect your rates. Regional risk factors are based on the risk of accident. If you live in an urban area with high-volume traffic and a high crime rate, you can expect to pay more compared to drivers in rural areas. Your zip code makes a big difference. The actual state you live in is a big factor as well. New Jersey, California, Florida and Texas are all in the more expensive tier of states. While New York, Illinois, Ohio and Arizona are in the bottom half of states.
Married couples are expected to combine auto insurance policies, which automatically yields discounts and cheaper rates. If you decide to buy a house and bundle your homeowner’s and auto insurance, look forward to an even better deal.
Six-Month Policy Prices for a Married Couple
Quotes are based on 25/50/25 liability protection with comp and collision coverage with $500 deductibles. Both drivers were rated for their own 2010 Toyota Corolla LE’s. Rates are based on the 90039 ZIP code of Los Angeles.
Number Of Drivers
Adding new teen drivers to a policy can increase rates, but there’s a catch.
Teen drivers bundled onto a parent’s auto insurance policy may be eligible for good student discounts. Some insurers provide up to a 20% discount for a student driver with a B grade average or on the Dean’s list.
For new drivers, a clean driving record is more important than ever as traffic tickets can cancel out a good student discount. As stated above, bundling experienced drivers in the same household on a policy, such as after marriage, can lead to a rate decrease. It is also possible to insure one driver for two cars.
- % Excess Cost