December 3, 2022

Javier14mascherano

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How Much Does Car Insurance Cost, and How Can I Lower My Rates?

8 min read

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Monthly car expenses are second only to housing costs in most household budgets, but we have good news: There are plenty of effective ways to lower your car insurance premiums even as prices rise. Just be careful: You’ll want to make sure you still have the coverage you need.

Keep reading for our tips on how to lower car insurance rates as well as how much coverage actually costs.

  • Factors that impact the cost of car insurance
  • The average cost of car insurance
  • What can lower your car insurance rates
  • How to get coverage for a 16-year-old driver

How Much Does Car Insurance Cost?

According to a 2021 Your Driving Costs study from AAA, the cost to insure a 2021 vehicle with full coverage is $1,342 annually. Full coverage includes physical damage coverage as well as liability coverage and medical insurance (where required).

However, rates can vary by location and other factors, sometimes dramatically. AAA’s study compiled average rates for drivers that fit a certain profile, which brings some advantageous rating factors.

In the AAA study, the insured drivers were:

  • Under 65 years of age
  • Experienced drivers with over six years of driving history
  • Accident-free
  • Insuring a late model car

Let’s consider each of these rating factors to better understand how rates might vary for drivers with different characteristics.

Driver Age

Age can play a role in auto insurance rates, with younger and older drivers paying higher premiums. Some insurers increase auto insurance rates beginning at age 70 to 75. At the other end of the spectrum, drivers under age 25 often pay more for coverage, as well.

Driving Experience

Driving experience also plays a role in rates. Some insurers won’t insure a driver with less than three years of experience unless they are added to the policy of a more experienced driver. Others may insure newer drivers, but the experience can be costlier before reaching the three-year threshold.

Accident History

Your recent accident history affects insurance rates. If you haven’t had a recent accident, you can expect lower rates—assuming all other rating factors are equal. From an insurer’s standpoint, everyone is risky, but they aren’t quite sure how risky we are. Until we have an accident, that is. Then, they know. Accidents can lead to higher rates for three to five years.

Location

Where you live can affect car insurance rates. While there are often significant differences in cost from one state to the next, AAA’s study was based on drivers in urban and suburban areas. This rating factor can go either way. Drivers in urban areas often pay more than drivers in suburban areas, and rural drivers often pay lower premiums than the first two groups.

In this case, insurers are looking at traffic density as well as other risks such as theft and vandalism. However, rather than examining where you drive, insurers typically consider garaging location, with the assumption that much of your driving will be close to where you park your car at night. Someone who lives in the suburbs and commutes into the city may pay lower rates compared to someone who lives and works in the city.

Age and Value of the Car

In AAA’s study, the drivers insured a 2021 model year car. Newer vehicles can cost more to insure because they are worth more. However, sometimes safety features available on newer vehicles can help offset the cost of insuring a more valuable car. Some insurers also offer a new-car discount.

Average Car Insurance Cost Per NAIC

The $1,342 average car insurance cost serves as a helpful reference point if you’re considering a late-model car. But many households have vehicles of various ages, sometimes with different insurance requirements.

For example, if you have an older vehicle that’s paid off, you might not need to carry physical damage coverage.

The National Association of Insurance Commissioners (NAIC) also puts out a report on auto insurance costs, breaking out the cost by state and insurance type.

  • Liability Average Premium: $650
  • Collision Insurance: $381
  • Comprehensive Insurance: $172
  • Combined Average Premium: $1204
  • Average Expenditure: $1,070

Here’s what these categories represent:

Auto liability insurance covers our financial responsibility to others for auto-related injuries or damage to the property of others. Both collision insurance and comprehensive insurance provide protection for physical damage to your own vehicle.

The combined average premium refers to full coverage, which includes required liability coverage and physical damage coverage. Some states require medical coverage, as well. Over a dozen states also require uninsured/underinsured motorist protection.

Average expenditure refers to the average amount insured drivers pay. Not all vehicles require full coverage, so the average expenditure is lower than the combined average premium for full coverage.

What Can Lower My Car Insurance Rates?

Insurance premiums reflect the risk of a claim, which can come from several areas. Some are broad risks, such as traffic density in your location. But rates also reflect the risk we bring individually.

While you can’t negotiate your rates with insurers, you may be able to capture some discounts that can reduce your overall cost of coverage. Good driving habits can also help keep rates lower.

Each insurer offers its own assortment of discounts, but many times insurance companies follow a similar blueprint. Here are some of the commonly available discounts to help reduce your overall insurance costs.

  • Multi-policy: Many insurers offer a discount for buying both home and auto insurance.
  • Multi-vehicle: Savings from multi-vehicle discounts can add up quickly because each vehicle on your policy earns a discount.
  • Defensive driving: By completing an approved defensive driving course, you can earn a discount good for up to three years.
  • Accident-free: Many insurance companies offer extra savings for staying accident-free.
  • Safe driver: A safe driver discount may consider your accident record as well but usually focuses savings on drivers with no moving violations.
  • Low mileage: Fewer miles driven means less risk. Many insurers offer a discount for drivers who drive less than 7,500 miles per year.
  • Early signing: If you don’t need coverage right away, you might be able to save money by signing up for coverage seven or more days before your effective date.
  • Payment discounts: Save money with discounts for pay-in-full, automatic payment, or paperless billing.
  • Homeowner: Many insurers offer a discount to homeowners, separate from the discount for buying home and auto insurance together.
  • Safety-related: Earn a discount for the features your car has, including antilock brakes, anti-theft protection, daytime running lights, and passive restraints (airbags and seatbelts). Some insurers also offer a discount for new car buyers.
  • Usage-based discounts: More insurers are offering usage-based discounts. The technology behind this is called telematics and utilizes an in-car device to measure miles traveled, time of day, and other driving metrics to reward lower-risk drivers with money-saving discounts.

What Other Factors Affect Car Insurance Rates?

Auto insurance rates consider more than just your driving history. The coverage limits and types of coverage you choose also affect costs. However, before you take a pruning shear to your policy limits, consider other factors that can affect your insurance costs. In the end, your coverage limits protect you and your family, so higher limits can be a wiser choice for some.

Below are some actionable factors that can affect auto insurance rates.

  • Credit score: In most states, auto insurance providers can use your credit history as a rating factor for car insurance. If your credit score could use a tune-up, taking steps to improve your credit history could lead to insurance savings, as well.
  • Traffic tickets: Moving violations can end up costing more than just the cost of the fine. Tickets for moving violations can cause you to lose a safe driving discount or even result in a surcharge that can last for years.
  • Annual mileage: Fewer miles driven translate to less risk of a claim.
  • Car make and model: The cost to insure a Tesla Model S can be more than double the cost to insure Honda CR-V. Before driving home in a car you fell in love with at the dealership, research the cost for insurance.
  • Continuous coverage: Sometimes you’ll earn better rates if you’ve had continuous coverage for three years or longer. A break in coverage of just one day can lead to higher insurance costs for years to come. Take steps to be sure coverage doesn’t lapse and when changing insurers don’t cancel the old policy until after the effective date and time for the new policy.

How to Get Coverage for a 16-Year-Old Driver

Car insurance costs can change dramatically if you have a young driver in your household.

If your new driver doesn’t yet have a license, you may not need to add them to your policy when they still have a learner’s permit. Your policy covers them under what’s known as permissive use. To be safe, reach out to your insurer to ask about their process and requirements for drivers with a learner’s permit.

However, you’ll definitely need to add your teen driver to your policy when they pass their driving test. Alternatively, some families encourage young drivers to get their own policy.

Adding your teen driver to your own policy is almost always the most affordable way to go. However, who owns the car also plays a role. If you own the car, the policy must be in your name. If your teen driver owns the car, the insurance needs to go in their name. If both names are on the title, you have some flexibility and can insure the car in either name.

When the day comes to add your 16- or 17-year-old to your policy, here are some discounts to ask about:

  • Good student discount: Many insurers offer good student discounts for students with As and Bs.
  • Student-away-at-school discount: Young drivers away at college can save on coverage if the car stays home and the school is far enough away (usually 100 miles).
  • Driver’s education discount: Many states offer driver’s education for students. Discounts for driver’s education are common.
  • Defensive driving course discount: Separate from a driver’s education discount, many insurers also offer a discount for completing an approved defensive driving course. Typically, these courses only cost about $20 to $30 and can provide savings for up to three years.
  • Telematics-based discounts: Many insurers now offer in-car devices that measure speed, braking, starts, cornering, and other metrics that concern driving safety. In many cases, you’ll earn an instant discount for participating with future discounts based on safe driving.

Getting a Handle on Car Insurance Costs

Car insurance premiums are among the biggest bills each month for many households, but there are several ways to save without sacrificing the coverage you need.

Most insurers recommend a policy review once every 12 to 18 months. If you haven’t reviewed your coverage lately, reach out to your insurer to discuss ways to save. If you’re shopping for new coverage, be sure to ask your new provider which discounts are available and how you can qualify.

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