The average annual cost of car insurance in the U.S. was $1,057 in 2018, according to the latest data available in a report from the National Association of Insurance Commissioners.1 However, knowing that statistic won’t necessarily help you figure out how much you will be paying for your own coverage. Rates vary significantly, and they’re based on personal details so it is important to search for the cheapest car insurance.
To better understand what you should be paying for auto insurance, it’s best to learn about the way companies determine their rates. Keep reading for an overview of the most common determinants, and how you can earn a few extra savings.
Calculating Average Annual Car Insurance Cost
There are a lot of factors that go into determining your car insurance rate. You can change some of these factors easily, others will take work to change, and others are out of your control. Here are some key factors that impact the average cost of car insurance in America.
Gender: Men are generally regarded as riskier drivers than women. The statistics show that women have fewer DUI incidents than men, as well as fewer crashes. When women do get in an accident, it’s statistically less likely to be a serious accident.
Age: Those under the age of 25 are considered risky drivers because of their age. Teenagers and brand new drivers are especially risky. If you’re younger than 25-years-old, you can expect to pay higher premiums.
Location: If you drive around Manhattan, you are a lot more likely to get in an accident than if you usually stick to backcountry roads in rural Kentucky. It isn’t just the amount of traffic that affects regional premium prices—local rates of vandalism, theft, and natural disasters will also be reflected in your premium price.
Marital status: Marriage means thinking for two people—and it signals to insurers that you’re less risky than you were in your single days. The statistics bear that out, with married people getting in fewer accidents. As a result, married people save on their rates.
Something less obvious is at play here, too; if your state mandates certain standards for car insurance that are stricter than others, you’re likely to pay more money. Michigan, for example, requires residents to have unlimited lifetime personal injury protection (PIP) for accident-related medical expenses as a part of their car insurance. This is one of the reasons why premiums in Michigan are among the most expensive in the country.
Occupation: If you are using your car as an actual taxi or driving for a rideshare service, you will have to pay more for insurance, and you might need to pay for a different type of insurance altogether. Talk to your company and your insurance agent about how your job can affect your rate.
Driving habits: The length of your commute, how often you use your car, why you use your car, and where you park all impact your premiums. If you have a long commute, you are exposed to the risks of the road for longer. If you drive more often, you’re exposed to the risks of the road more frequently. Carpooling, telecommuting, and taking public transportation could all save you money in premiums.
Driving history: This one should be pretty obvious. If you have a history of racking up tickets, you are a riskier driver to insure, and you will pay more in premiums. Installing tracking software on your vehicle could help lower your premiums when you have a less-than-perfect history.
Type of vehicle: That super sleek sports car you’ve always wanted? It’s not just going to cost you the sticker price: driving a valuable car makes you riskier to insure. That’s because driving a flashy car makes you a target for criminals. Insurance premiums also account for the overall safety of a car and the average cost of repairs. If you’re looking to save on insurance, buy a minivan, a sensible sedan, or an SUV. You should also consider buying a used car and installing anti-theft devices.