Factors affecting the cost of car insurance
The national average cost of car insurance is $155 per month, or $1,860 per year. Insurance costs can vary by driver, but how much you ultimately pay for coverage isn’t random. Insurers consider several factors when assessing your risk level as a driver.
Here’s a look at the factors that influence insurance costs.
Your personal information
Auto insurance companies typically look at your marital status, gender, age, credit history, and driving history before offering you an insurance quote. Young drivers have some of the highest rates. If you have a spouse, are older than 30, and have fewer traffic violations, insurers see you as more responsible and often offer lower rates. Driving frequency is another factor insurers consider. Daily commuters might pay higher rates than occasional drivers.
Your car model
Every car is different, so rates can vary by vehicle type and model. New luxury models or sports cars have a higher value, which typically means more expensive repair costs and higher premiums. Vehicle models equipped with safety features suggest a reduced risk of accidents and injuries, potentially leading to more affordable car insurance policies and extra discounts for policyholders.
Keep in Mind
Not only does the type of car you drive affect your rates, so does who in the family drives it. Generally, it’s a good idea to assign high-risk drivers like teenagers to the safest vehicle on your policy. That way the lower cost of a vehicle with a good safety rating can offset the higher cost of a teen driver.
Location and parking
Like real estate, car insurance costs vary based on location. Living in a city with a high cost of living, population density, or crime rate — especially car theft — can increase base premiums in the area. Parking on busy city streets can also increase expenses because leaving your vehicle out in the open exposes you to more risk of theft and vandalism than keeping it in a locked garage. Drivers in rural and suburban areas typically pay less for coverage than people in highly populated urban areas.
Your credit history
Though it may seem unrelated, your financial stability influences auto insurance rates. In many states, insurers can use a driver’s credit history to generate a credit-based insurance score. Most insurance companies view that score as a good indicator of risk, according to the National Conference of State Legislatures. A good credit score can suggest responsibility, so drivers with good credit tend to earn lower rates than people with poor credit.
However, some states prohibit or restrict how insurers can consider credit. Insurers can’t use credit history to set rates in California, Hawaii, Massachusetts, and Michigan. And Oregon and Utah limit how insurers can use it.
Your state’s car accident laws
Whether you live in a no-fault or at-fault state can affect your car insurance costs. Drivers in no-fault states typically pay higher average rates because, in the event of an accident, each involved party needs to file a claim for any medical costs with their own auto insurer. In at-fault states, the responsible driver must cover the other driver’s vehicle damage and bodily injury.
Your policy type and coverage limits
The type of car insurance policy and coverage limits you choose can affect your overall insurance cost. For instance, liability coverage that meets state-minimum auto insurance requirements tends to be more affordable, but full-coverage policies come at a higher price because they offer more financial protection. More on that below.