Shopping for car insurance can be a confusing process, especially when it comes time to pay for coverage. How do you know if you’re overpaying? What exactly is affecting those rates? The truth is that a lot of factors are at play. Some are within your control, like the type of car you own and your driving history. Others factors are not, like accident and theft rates in your area.
The best way to get an accurate auto insurance estimate is to cross-shop multiple insurers for the same coverage. You can do that using the comparison tools on this page. Every insurance company evaluates these factors differently. While one insurer may dial up your rates for a speeding ticket, another may not. We’ll discuss each of these factors in the next section.
Factors That Affect Car Insurance Rates
First, let’s talk about what insurance is. A car insurance policy is an agreement between a policyholder (you) and an insurance company. In exchange for a monthly payment, or premium, the insurer agrees to cover you for certain losses or events. This can include damage to your vehicle, injuries to you and your passengers, as well as injuries and property damage to others. The amount you pay for insurance largely has to do with how likely you are to have an accident and make a claim. Insurers use a process known as underwriting to evaluate that likelihood and price their policies accordingly.
Insurance Underwriting Guidelines
Underwriters typically look at the following risk indicators when calculating car insurance rates.
- Driving record: If you’ve received a speeding ticket or been in an accident within the past three to five years, insurers view that as an indication of risky driving behavior, and they will typically raise your car insurance rates because of it. On the other hand, drivers with an accident-free record may receive a discount on their policy, because they pose a lower risk. The average cost of car insurance for drivers with a clean record is $1,416, according to our analysis of national study rates. A speeding ticket increases those rates by $308 on average, while a single accident can raise rates by $612. Getting a DUI can balloon rates by $1,048 on average.
- Annual mileage: The likelihood of getting in a car accident increases the more you drive. This is why high-mileage drivers often pay more for car insurance than low-mileage drivers. If there’s been a recent change in your driving habits, you should contact your insurer to update your mileage estimates accordingly, as it could save you money.
- Vehicle make and model: Generally speaking, nonluxury cars and SUVs are cheaper to insure than luxury vehicles, because the cost to repair or replace these vehicles is lower. That said, insurers also look at a vehicle’s theft rate, safety features, and how a type of vehicle is typically driven. For instance, a sports car is usually pricier to insure than a minivan or family sedan.
- Credit score: People with good credit aren’t necessarily better drivers, but insurers view them to be more financially responsible, and that responsibility is rewarded with better rates. On average, drivers with good credit paid 16% less on car insurance than those with fair credit, according to our analysis of study rates. That’s a difference of about $265 per year.
- ZIP Code: The more cars on the road, the higher the likelihood of an accident. This is why drivers in large high-traffic cities tend to pay more for car insurance than those in rural areas. Vandalism and theft rates are typically higher in cities as well, which also drives up the cost.
- Driver age: Younger drivers, especially teenagers, tend to have less experience behind the wheel than older drivers. Insurers relate inexperience to higher risk. Even if you are an experienced driver, your rates will likely go up if you add a younger driver to your policy. On average, 35-year-old drivers paid 16% to 22% less than 25-year-old drivers, according to our analysis of study rates.
Car Insurance Deductible
Your deductible also has a big impact on your car insurance costs, but it’s a factor that you can control. A deductible is the amount of money you must pay upfront when making a claim before your insurance covers your expenses. It’s one of the ways insurers mitigate some of their risk. For example, let’s say your deductible is $500. If your car was damaged by hail and it costs $2,000 to repair, you would have to pay $500 before your policy pays out $1,500.
By raising the deductible, you can often lower your monthly premiums. The tradeoff is that you’ll initially pay more out of pocket. Conversely, lowering your deductible or eliminating it altogether typically raises your rates, because the insurance company is accepting more risk.
State Car Insurance Requirements
Each state sets its own minimum requirements for coverage, and these minimums vary widely. As a result, a basic policy in one state can cost hundreds of dollars more than basic coverage in another.
The so-called "no fault states” tend to have pricier car insurance on average. These states require drivers to buy personal injury protection, or PIP, in addition to the standard liability coverage. This type of policy allows a driver to receive compensation for their medical bills and lost wages from their own insurance company, regardless of who caused the accident. The 12 states where no-fault insurance is required are: Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah.
A Snapshot of Our State Insurance Buying Guides
Select a State
- District of Columbia
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
How Much Car Insurance Do I Need?
There is no one-size-fits-all car insurance policy. A level of coverage that works for you may not be ideal for your coworker or neighbor, because everyone has different personal and financial obligations. The rationale behind selecting coverage doesn’t change though.
You must have enough car insurance coverage to meet any state and lender requirements, as well as enough to adequately protect your assets. This can include your home, vehicle, and savings.
Liability insurance compensates the other parties affected in a car accident when you are at fault. It’s required by law in every state, and it includes two types of coverage. Bodily injury liability coverage pays for medical care, such as hospital visits and rehabilitation. Property damage liability coverage pays for vehicle repair or replacement, as well as damage to landscaping, buildings, and other structures.
Liability policies are typically outlined as a ratio. For instance, a 50/100/25 policy would cover up to $50,000 for the injury of one person, up to $100,000 for the injuries of multiple people, and up to $25,000 for property damage, per accident.
You should choose a policy with more liability coverage than the minimum required, especially because the minimums are quite low in many states. The costs of healthcare and vehicle repair can add up, and if your coverage isn’t sufficient, those affected by an accident can take you to court to pay their remaining bills. Using the example above, if you were to cause an accident that totaled someone’s $40,000 car, you may be liable for the $15,000 difference between what your insurance will pay and the car’s value.
Collision and Comprehensive Coverage
Collision insurance pays for the damage caused to your vehicle in a traffic accident. Comprehensive coverage pays for other types of damage to your vehicle, like vandalism, flood, fire, and hail damage. These coverages aren’t legally required by any state, but they are typically required by your lender when leasing or financing a vehicle, and they can increase your rates substantially.
If you drive a newer vehicle that would be expensive to replace if totaled, you’re going to want collision coverage at the very least. Even if it raises your rates, the total cost to insure that vehicle is apt to be less than the cost to replace it. On the other hand, if you drive an older car that isn’t worth very much, the cost of collision insurance could be higher than what your insurer would pay to replace it.
Other Types of Coverage
- Uninsured motorist coverage pays for your and your passengers’ medical bills and property damage if the driver at fault in an accident doesn’t have insurance. It also covers these same costs in the event of a hit-and-run accident. Underinsured motorist coverage pays these expenses when the driver at fault doesn’t have enough liability coverage to do so. A number of states require these coverages.
- Personal injury protection pays for medical bills and lost wages if you or your passengers are injured in an accident, regardless of fault. It’s required in a dozen states and optional in others.
- Medical payments coverage is optional in many states, and it pays for your accident-related medical bills. If you already have health insurance, you may find it worthwhile to skip this coverage, as the two policies may overlap.
- In the event of an accident where your vehicle is totaled, gap insurance pays the difference between the value of the vehicle and the amount remaining to be paid on the loan. It’s typically required when you lease or finance a car.
If you’re really looking to save money on your car insurance rates, consider opting out of the following coverages as they have more to do with convenience than personal or financial protection.
- Roadside assistance coverage pays for towing expenses.
- Rental car reimbursement coverage pays for a rental car when your vehicle is inoperable due to an accident.
- Glass repair coverage pays to replace a broken or cracked window when not covered by comprehensive insurance.
Car Insurance Rate Methodology
To get the study rates shown here, U.S. News worked with Quadrant Information Services to analyze a report of insurance rates in all 50 states from the nine largest national car insurance companies. Our study rates are based on profiles for both male and female drivers aged 25, 35, and 60. Vehicles used include the 2015 Honda Civic, 2015 Toyota RAV4, and 2015 Ford F-150, with annual mileage ranging from 6,000 and 12,000. Three car insurance coverage levels were used, as were credit tiers of good, fair, and poor. Clean driving records and records with one accident, one speeding violation, and one DUI were also used in certain calculations. The rates shown above are for comparative purposes only and should not be considered “average” rates available by individual insurers.
The Best Car Insurance Companies in 2020
Our Car Insurance Ranking
The Cheapest Car Insurance Companies in 2020
Average Annual Rates:
- USAA: $885
- Geico: $1,168
- State Farm: $1,234
- Travelers: $1,267
- Progressive: $1,373
- American Family: $1,391
- Farmers: $1,682
- Nationwide: $1,864
- Allstate: $1,880