There are many factors that affect your car insurance rates, including in most states your age, gender, where you live, your credit and driving history and the type of car you drive, among others. In addition, the types of car insurance you buy and car insurance discounts you qualify for also influence how much you pay.
While the variables insurance companies consider when pricing policies are fairly standard across the industry, each insurer uses its own formula for assessing risk and setting rates based on these variables. That's why the price of a policy can differ by hundreds or thousands of dollars among carriers -- and why it’s wise to compare insurance companies.
Comparing car insurance quotes to see which car insurance company is the cheapest will save you the most. For instance, CarInsurance.com’s rate analysis found the following potential savings, or the difference between the highest and lowest price, for the same policy:
State minimum liability – average savings of 153 percent, or $497
Full coverage – average savings of 138 percent, or $1,127
The data analysis indicates that many drivers who don't shop their policies could be paying too much for their car insurance. When you do decide to shop for a new policy, know what main factors insurers use to set your rates. Here are 10 to be aware of:
1. How your address affects car insurance rates
Where you live (and park your car) will have a direct impact on your insurance premium. Of the all the factors that affect car insurance rates, location is chief among them. Insurers probably know more about your neighborhood than you do. They study crime rates, neighborhood densities, the number and severity of claims made annually and even the weather patterns to assess the risk you present. Find out how much you can expect to pay by entering your ZIP code into the average car insurance rates tool below. You'll see the highest and lowest rate for your neighborhood fielded from up to six insurers, which shows how much you can save by comparison shopping, as well as the average annual rate for six age groups and three coverage levels.
2. The types of car insurance and how much coverage you need
Penny Gusner, consumer analyst with CarInsurance.com, recommends shopping your premium at least once a year. "But before each renewal period (every six months) is preferred to make certain that you always have the cheapest insurance premium."
Shopping is especially important if a ticket or accident falls off your record. "This will make you more appealing to more insurers," says Gusner. Life changes are another reason to shop around. Getting married, adding a driver or moving to a new neighborhood could result in a lower premium.
Before you fire up your computer and start gathering quotes, you should determine your ideal policy limits. Minimum liability insurance limits vary by state, but usually are not nearly enough to fully protect you.
Gusner recommends carrying 100/300/100 in liability coverage, which translates into $100,000 per person and $300,000 per accident for bodily liability and $100,000 for property damage liability. That's for the injuries and damage other people suffer if you cause an accident. If you have few assets, don't own a home and drive an old car that's not worth much, you can likely get by with liability limits of 50/100/50.
You will also need collision and comprehensive insurance if you want your car repaired after it is hit by another vehicle or damaged from fire, vandalism, striking an animal or natural events, like hail storms. Comprehensive insurance also reimburses you for the vehicle's value, minus your deductible, if the car is stolen.
Let's not forget the deductible. "While $500 is a common choice, you can save money if you go with a higher deductible, such as $1,000," advises Gusner.
The deductible applies to collision and comprehensive claims.
To give you an idea of what you can expect to pay, you can see details from our guide on how estimate car insurance costs, and for now, additionally, here's a comparison of the average yearly cost of the following coverage levels, by state:
State minimum liability
State minimum liability with comprehensive and collision, with $500 deductible
50/100/50 liability, with $500 deductible on comprehensive and collision
100/300/100 with $500 and $1,000 deductible on comprehensive and collision
State minimum - liability only
Liability Only - 50/100/50
Liability Only - 100/300/100
Full Coverage - State Minimum $500 deductible
Full Coverage - 50/100/50 $500 deductible
Full Coverage - 100/300/100 $500 deductible
Full Coverage - 100/300/100 $1,000 deductible
*Methodology: The table shows the average annual rate for a 2017 Honda Accord LX for a driver age 35 with a clean record and good credit, culled from 10 ZIP codes in the state from the following carriers, in no particular order: Progressive, Allstate, State Farm, Nationwide, GEICO and Farmers. Data was provided for Insurance.com by Quadrant Information Services. New Hampshire doesn’t require drivers to have car insurance, but most drivers do, and we’ve listed what is mandated if you choose to carry coverage.
3. Credit score
Nearly all insurance companies use your credit information as a factor to determine rates, so a low credit-based insurance score will raise your premium (unless you live in California, Hawaii or Massachusetts, which don't allow the practice). It all goes back to risk. Studies show that people with bad credit tend to file more and higher claims.
In states where a credit-based insurance score is allowed to influence rates, the impact of bad credit can significantly hike your policy price. CarInsurance.com commissioned Quadrant Information Services to compare full-coverage rates for drivers with good and poor credit. The research shows that, on average, drivers with bad credit pay 71 percent more than drivers with good credit, or about $1,000 a year.
4. Age and car insurance rates
Your age will impact your premium, especially if you are young or in your twilight years. Statistics from the Insurance Institute for Highway Safety (IIHS) show that the fatal crash rate for teen drivers is three times those of drivers over the age of 20.
On the other end of the spectrum, older drivers tend to be involved in more accidents. CDC stats show that fatal crash rates increase around 75 and skyrocket at age 80.
A CarInsurance.com data analysis of average car insurance rates by age shows that, in general, rates are cheapest for drivers in their 40s, 50s and 60s, and then increase again a bit at age 70.
5. Marital status
Statistics show that married drivers are involved in fewer accidents and are issued fewer tickets than single people. In some cases, insurers will even drop the rates of drivers under 25 if they tie the knot. Combining or bundling policies with your new spouse can also send your premium down.
6. Type of vehicle
The type of car you drive will have an impact on your premium quote. Insurers will take into account the car model's claims record. As a result, if a lot of younger drivers who have accidents drive the same model as you, you may pay a higher rate. Have your car's Vehicle Identification Number (VIN) handy when applying for new coverage.
7. Vehicle use
How you use your car will impact your premium. If you use your vehicle for commercial purposes, even something as minor as a part-time pizza delivery job, you need to disclose this. Failure to do so could result in a denied claim if you are in an accident while on a delivery.
If you have a long commute or drive frequently after midnight expect your rate to be a bit higher.
8. Licensed drivers
List all licensed drivers living in your household, regardless of whether they drive your vehicle. Omitting a driver could result in a denied claim or a cancellation if the unlisted driver is involved in an accident.
As soon as your child has a valid driver's license, add the teen to your policy. Expect to pay, on average, about 143 percent more to add a sixteen-year-old to your policy. While the cost to add a teen to your policy certainly stings, it's worth it to be sure that you're financially protected should your teen driver have an accident.
In general, the two exceptions to the "list all licensed drivers in your household" rule are an adult child who lives with you but has his own vehicle and a parent who lives with you but has his or her own car.
9. Driving record
Your driving record indicates how risky you are as a driver. A driving record packed with tickets or accidents is a red flag for any insurer.
Insurers will check your driving record when you apply for coverage, and again at renewal time. This is why it's wise to know how to check your driver record, and why it's so important to fix any errors.
If you have recent moving violations, such as speeding tickets, expect those violations to raise your rates for three to five years. How much insurance goes up for speeding tickets depends on how fast you're driving, your state laws and your insurance company, among other factors, but typically your rates will increase by about 20% to 30%, or about $300 to $450, yearly.
While it may be tempting to fudge the facts on your application, that is a bad idea. "If you give incorrect information on the quoting form, and the insurance company finds the error, it will recalculate your premium or may decide to rescind its policy offer," warns Gusner.
10. Claims history as well as prior insurance history
Accidents and tickets aren't the only things that will ding your insurance rates; all claims can potentially have an effect on your rates. While at-fault claims will result in a surcharge (higher rates) and comprehensive claims generally will not, the number of claims you make matters. Exactly how much your insurance rates increase after an accident also depends on your insurance company and other factors. But, CarInsurance.com data research shows a recent accident claim will hike rates by about 30%, or $450 a year.
If you have made a number of claims, of any kind, on your policy in a short period of time, such as three claims in three years, expect your car insurance rate quotes to be higher. A large number of claims will peg you as a higher risk and raise your premiums for at least two to three years.
Proof of insurance verification, which shows that you had insurance coverage before applying for a new policy, is something every insurer will ask you to provide. In most states driving without car insurance is illegal so a lapse, or a number of lapses in your coverage, will be a concern.