Understanding Car Insurance Rates

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Car insurance provides financial protection after a car accident. Driving uninsured can lead to tens of thousands of dollars in damages and injuries.

A crucial component of your policy is your car insurance rates. Understanding how rates work can help you get the most competitive price for the coverages you need. Policygenius estimates that the average car insurance rate is $1,128 per year or $94 per month

What Are Car Insurance Rates?

Car insurance rates are the cost of your policy's coverage. Although it's often used interchangeably with premium, those two concepts aren't exactly the same. The California Insurance Department puts it this way, "The rates form the building blocks of the premium you eventually get charged and include discounts for some risks and additional charges for other risks."  Basically, insurers use rates to calculate your premiums, while your premium is the actual dollar amount you'll pay. 

Knowing car insurance rates and how they affect premiums is key to finding a policy that fits your budget. 

Importance of Car Insurance Rates

Understanding your car insurance rates is an important part of managing your insurance policies. It helps you budget for monthly or annual costs, and find ways to lower them. 

Factors Affecting Car Insurance Rates

Factors affecting car insurance premiums include your age, gender, credit score, driving record, vehicle type, location, and coverage.

Personal Factors

Personal factors, like age, gender, and credit score influence car insurance rates. The Insurance Information Institute reports that teen and male drivers get into accidents more frequently, so insurers charge higher rates to drivers in those demographics. 

Your insurance-based credit score also affects your rates. Statistically, policyholders with higher credit scores file fewer claims, leading to better policy rates. The table below illustrates car insurance premiums by age and gender based on data from Policygenius.

By Age: 

Age

Yearly Cost

16

$6,779

17

$5,868

18

$4,931

19

$3,822

21

$2,708

25

$1,929

30

$1,706

35

$1,654

45

$1,583

55

$1,463

60

$1,449

65

$1,494

70

$1,585

By Gender:

Driver's Gender

Annual Cost

Female

$2,385

Male

$2,574

Driving Record

Insurers pay attention to your driving history when calculating your insurance rates. Those with clean driving records have lower insurance rates than those with moving violations, like speeding tickets, at-fault accidents, and DUIs. The frequency and severity of the infraction also impact your premiums. See the table below for the average cost of car insurance based on different driving profiles, according to Insurify.

Driving Profile

Average monthly cost

Clean

$147

One speeding ticket

$224

One at-fault accident

$232

Reckless driving

$248

One DUI

$264

Vehicle Type

The type of vehicle you own determines how expensive your insurance premiums will be. The higher the replacement cost of your car, the more you'll have to pay for coverage. The Insurance Information Institute also notes that insurers consider your vehicle's theft rate, engine size, and overall safety record. Take a look at the average annual premium for car insurance based on cars of various makes and models.

Vehicle

Average Annual Premium

Ford F-150

$1,665

Honda CR-V

$1,673

Toyota Tacoma

$1,714

Ford Escape

$1,735

Subaru Outback

$1,744

Nissan Leaf

$1,955

Honda Accord

$1,990

Chevrolet Bolt EV

$2,015

Tesla Model 3

$2,855

Tesla Model Y

$2,884

Source: Policygenius 

Location

Your state and city, even ZIP codes within a city, have a significant impact on your insurance rates. Insurers look at the cost of living in a particular area and risk factors such as weather events, population density, traffic congestion, accident rates, and crime rates. Expect elevated rates if you live in an area with increased living costs (think Los Angeles or New York City). 

Similarly, living in regions with increased exposure to various risks, like many urban areas, will lead to higher rates. The table below depicts the average annual car insurance rates by state. 

State

Yearly Cost

Alabama

$1,728

Alaska

$1,393

Arizona

$1,600

Arkansas

$1,768

California

$1,837

Colorado

$1,852

Connecticut

$1,856

Delaware

$2,144

District of Columbia

$1,802

Florida

$2,794

Georgia

$1,625

Hawaii

$1,208

Idaho

$1,094

Illinois

$1,332

Indiana

$1,215

Iowa

$1,158

Kansas

$1,532

Kentucky

$2,181

Louisiana

$2,531

Maine

$1,096

Maryland

$1,784

Massachusetts

$1,553

Michigan

$2,425

Minnesota

$1,422

Mississippi

$1,664

Missouri

$1,588

Montana

$1,902

Nebraska

$1,617

Nevada

$2,198

New Hampshire

$1,284

New Jersey

$2,225

New Mexico

$1,460

New York

$2,048

North Carolina

$1,084

North Dakota

$1,405

Ohio

$1,008

Oklahoma

$1,713

Oregon

$1,443

Pennsylvania

$1,672

Rhode Island

$1,830

South Carolina

$2,018

South Dakota

$1,487

Tennessee

$1,329

Texas

$1,818

Utah

$1,555

Vermont

$1,047

Virginia

$1,349

Washington

$1,730

West Virginia

$1,615

Wisconsin

$1,109

Wyoming

$1,394

Source: Policygenius 

Coverage Options

Insurers offer an array of coverage options to increase your protection against various hazards. The more coverage you have, the higher your premiums will be. For example, a full-coverage policy, which includes comprehensive coverage and collision protection for your vehicle will be more expensive than a liability-only policy, the state-mandated minimum coverage. Take a look at the differences in annual cost of a standard full-coverage policy versus a liability-only policy. 

Coverage type

Average annual premium

Liability-only

$617

Full-coverage

$1,638

Source: Policygenius 

How to Get the Best Car Insurance Rates

Below are a few tips for getting cheap car insurance for the coverage you need.

Comparing Quotes

Comparing quotes using an insurance broker or online comparison calculator is one of the most effective ways to reduce your premiums. Insurance companies calculate different rates, and not shopping around could mean you're not getting the best deal in the market. Consider comparing quotes at each renewal or at least once a year. 

You can find wallet-friendly coverage by reviewing our guide to the best cheap car insurance companies.

Bundling Policies

Save money by bundling insurance policies from one company rather than buying them separately. Most insurance providers offer loyalty discounts, with the common bundle including home and auto insurance. But companies may also allow you to bundle with other products, such as pet or renters insurance. 

Maintaining a Clean Driving Record

Avoid higher rates by staying accident and violation-free. Moving violations are a red flag to insurers and lead to increased rates. If you have a less-than-perfect record, consider taking an approved driving course to improve your driving. It may also result in a discount. 

Utilizing Discounts

When purchasing a policy, companies automatically apply discounts based on your driver profile and history. But it doesn't hurt to ask your insurer if you qualify for more, especially if it's been a while since you've updated your policy. Common discounts include multi-car, student, affiliation, and loyalty discounts, among others.

Adjusting Coverage Levels

Some insurance is better than no insurance. If you can't afford your policy, adjusting your coverage may help with costs. Some ways to do so are by buying mileage-based insurance or opting out of certain optional coverages. You can also switch to a liability-only policy if you're really strapped for cash, but it should be your last resort. 

How Car Insurance Rates Are Calculated

Auto insurance companies calculate rates using actuarial data and by conducting a risk assessment. This process ultimately leads to the premium adjustments reflected in the final premium you see on your policy.

Actuarial Data

Actuarial science involves statistical analysis across a large pool of insured individuals or vehicles to predict the likelihood that a certain risk will lead to a claim. For example, insurers may review historical accident and claim frequency by driver age, vehicle type, and location data. This analysis forms the foundation for calculating base rates.

Risk Assessment

Insurers use risk assessment to determine the likelihood that a policyholder files a claim and any financial losses the insurer might incur by insuring the applicant. As opposed to actuarial analysis, risk assessment focuses on individual risks, such as driving history, credit score, and other personal factors. This step personalizes your base rates established from actuarial data.

Premium Adjustments

After calculating individual rates, insurers increase or decrease premiums based on different characteristics, such as coverage limits, endorsements, deductibles, discounts, etc. Insurers also make periodic adjustments according to external factors like inflation and market conditions. These adjustments ensure that the premium remains accurate and fair over time.

Regional Differences in Car Insurance Rates

As mentioned, location has a major impact on your auto insurance rates. Below are several reasons why: 

State Regulations

Several states mandate drivers to carry more coverage than other states, which can increase your rates. For example, drivers in no-fault states must carry their own medical benefits, either in the form of personal injury protection or medical payment coverage. 

Urban vs. Rural Rates

Insurance companies tend to charge different rates for policyholders in urban and rural areas. Drivers in urban regions face increased exposure to various risk factors, such as accidents and crime, so they will likely see higher rates on their policies. 

Average Car Insurance Rates FAQ

Factors that influence rates the most include age and gender, driving history, location, vehicle type, and the coverages you choose.

Lower your rates by maintaining a clean driving record, comparing quotes, bundling policies, and utilizing available discounts.

Rates vary by location due to differences in state regulations, local accident rates, crime rates, and other regional risk factors.

Your credit score will affect your rates in many states. Insurers use your credit-based insurance score to determine how likely you are to file a claim. Those with good to excellent credit histories tend to see reduced car insurance rates than those with poor scores.

You should shop for new car insurance rates at renewal (typically once a year) and whenever you experience significant life changes, like a location change.

Editorial Note: Any opinions, analyses, reviews, or recommendations expressed in this article are the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any card issuer. Read our editorial standards.

Please note: While the offers mentioned above are accurate at the time of publication, they're subject to change at any time and may have changed, or may no longer be available.

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