Pegging the average cost of car insurance isn't an easy task - not when prices vary from state to state.
But there are figures available to at least provide some commonality on auto insurance costs. A new study from Value Penguin says the average price of car insurance is $941.65 in 2019.
But that's not the only take away from the Value Penguin study:
The three most expensive states for auto insurance are Louisiana, Michigan and Florida, with average car insurance prices ranging from $1,596 to $1,824 annually, On the less expensive side, North Dakota, Ohio, and North Carolina have the lowest auto insurance rates, at a cost range of between $428 to $520.
Auto Insurance Rates by Age
Auto insurance rates vary by age as well.
That's understandable, as insurance companies deem younger drivers as a bigger accident risk than older drivers. The younger set is more likely than other demographics to get in an accident, get a speeding ticket, and get cited for driving under the influence.
In the Value Penguin report, teenage drivers pay four times the auto insurance rates paid by the next younger demographic - U.S. drivers in their 20s. Dollar-wise, that "risk" gap can really cost teen drivers. Consider that the average 16-year-old U.S. driver pays $344.78 a month compared to a 25-year-old driver who only has to pay $118.89 a month for vehicle insurance.
When that scale slides up in age the difference in prices widens. Here's a glance at auto insurance rates by age demographic, from the Value Penguin report:
Auto insurers also vary their costs by gender.
For instance, while a 16-year-old boy pays $344.78 per month for auto insurance, a 16-year-old girl only pays $280.56 for the same auto policy.
That gap narrows for 30-year-olds, where men pay $100.44 per month for auto insurance while a 30-year-old woman, on average, $102.11. Moving up to 45-years-of-age, men pay $95.78 per month while women pay, on average, $97.78.
Lastly, auto insurance costs also vary from insurance carrier to insurance carrier. The Value Penguin study breaks prices down by company, based on an auto policy for a 30-year-old man who drives a 2011 Toyota (TM) Camry. Here's how that annual policy is priced on a company to company basis - from cheapest to most expensive:
Factors That Influence Your Auto Insurance Rates
To land the best bargain on auto insurance, it helps to understand how insurance companies calculate auto rates and what factors they use to make those calculations.
Here are the factors insurers count on most:
1. The Amount of Insurance You Aim to Buy
Insurance policies do vary, and some drivers may want extra protection while others may not. The amount of insurance you want to buy is the largest impactor on auto insurance prices. The more coverage you want, the higher your auto insurance bill.
2. Your Driving Record
If you have a history of speeding and moving violations, expect to pay significantly more for auto insurance. The reasoning is sound enough - the more risk you bring to the table, the more you'll be charged for auto insurance.
3. Your Credit Score
The way insurance companies see it, the higher your credit score, the lower your risk - and you'll get a better deal on auto insurance. Insurance industry data shows that the lower a driver's credit score, the more likely that driver has accumulated moving violations or a DUI, or has been involved in an accident. That's why insurance companies care so much about your credit score - it's a useful barometer of your potential driving risk.
4. Your Age and How Long You've Been Driving
Insurance companies view drivers who've been on the road for a long time as good credit risks. Conversely, if you've only been driving for a few months, and you're still in your teen years, expect to pay up to an extra 30% or so for car insurance - mainly because of inexperience.
Other factors that affect car insurance include: the type of car you drive, how much you drive, and where you live. An expensive car requires more insurance, as does a car with fewer safety features. Driving long distances or commuting regularly increases your chances of an accident, thus your insurance may be higher. If you live in an area where there are more claims, that can boost your cost too.
Tips on Getting the Lowest-Cost Insurance Policy
Now that you're on board with the various costs of auto insurance, let's examine some ways you can buy good vehicle insurance at the lowest price.
Take these action steps to grab the best deal you can:
1. Pay Off Your Vehicle as Soon as Possible
If your vehicle isn't completely paid off, and you're still paying down loan debt, that works against you with auto insurers. Since the lender is still being paid off, it will demand that you purchase comprehensive and collision insurance. Lenders do so to protect their investment while you're still paying off the loan. Pay the loan off, and you can give yourself a discount on auto insurance by shedding insurance you don't need.
2. Avoid Insuring Multiple Vehicles
Insurance companies are always talking about bundling policies to save money, but that's not really the case if you insure multiple vehicles on one policy. Insurers see an extra vehicle being insured and immediately escalate the risk of something bad happening to your vehicles. Insurers try to avoid claims, so any action you take to insure multiple vehicles heightens the risk of a claim being filed.
3. Boost Your Deductible
Raising your deductible can also help you save money on auto insurance. For example, by boosting your policy deductible from $250 to $500, you can slash your auto insurance by up to 30%. This tactic is especially helpful if you have a clean driving record with no accidents. Good driving plus a higher deductible is an ideal formula for saving cash on your auto insurance.
4. Grab All the Discounts You Can Get
Auto insurance companies don't mind giving out discounts if you or a family member covered under the policy have gone the extra mile. Check these potential discounts out and ask your insurer if they're offering a similar deal to customers:
- Good academics/high report card.
- Young drivers who have taken and passed a driver safety course.
- More senior drivers who have taken and pass a safe driving "refresher" course.
- All drivers who have taken a defensive driver course.
- Installing anti-theft and safety equipment in your vehicle, making it harder to steal.
- Low annual mileage on your vehicle.
- A driving history that is accident-free.
5. Have a Solid Credit Score
Chances are that if you have a FICO credit score of 660 or higher, you'll qualify for a price break on your auto insurance policy. That's because insurers give the best rates to the drivers who demonstrate low-claim tendencies. To insurance companies, having great credit is a sign that you're careful and diligent about paying bills and handling your finances - and that behavior deserves a discount.
6. Avoid Claims
If there is one issue that insurance companies decry more than any other, it's customers who have made insurance claims in the past. Drivers who are prone to making one claim will likely make another, and that hits insurance companies right where it hurts - in the pocketbook. If you don't have a history of any claims, insurers will likely view you as a lower credit risk, and start talking discounts.
Get to Know Your Auto Insurance Policy
The best way to get a good grip on your auto insurance costs is to review your policy, ask for as many discounts as you can get, and be an ultra-safe driver who doesn't get into accidents.
Manage all that and you should qualify for an auto insurance policy that's low in price and high in quality - jut the combination you need to keep your household budget in excellent form.