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Estimating car insurance costs
Are you paying too much for car insurance? It's a question most drivers ask themselves. Knowing how to properly estimate how much you should be paying can help you when you're on the hunt for a new car insurance policy. Along with The Zebra's car insurance cost calculator tool above, we've also compiled the following guide and other resources to help in your search for fair car insurance rates.
Key takeaways
- Your rates can vary by location, driving history, and the car you drive
- The average monthly cost for car insurance in the U.S. is about $124
- Every insurer has its own underwriting process, meaning quotes will vary widely from one company to another
- Compare quotes from multiple companies to get the best rates
How to calculate how much car insurance coverage you need
If you're looking for a new car insurance policy, it's important to understand the various coverage components that go into an insurance policy.
The typical auto insurance policy may consist of six coverage types:
Comprehensive and collision coverages are considered optional coverage types, though many lenders or leasing companies may require them. Most car insurance companies offer the ability to build a policy that suits your financial situation and driving needs.Â
Comprehensive and collision coverage overview
Both of these coverages protect your vehicle from physical damage. Your collision coverage protects your vehicle if you collide with another car or fixed object whereas your comprehensive coverage protects your vehicle from weather-related incidents, animals, or vandalism. When paired together, these coverages are often collectively known as full coverage.
These coverages are not required by state law but can be required if you’re leasing or financing a vehicle. Both are also subject to a deductible — what you pay prior to your insurance company reimbursing you for any damage.
Learn more about comprehensive and collision coverages.
Underinsured/uninsured motorist coverage
Uninsured and underinsured coverage pays for damages in the event the at-fault driver in a collision doesn't have insurance — or doesn't have enough insurance — to cover the damages inflicted. Underinsured and uninsured coverage usually falls into one of two buckets:
- Uninsured property damage insurance coverage:Â Coverage for a vehicle in the event of monetary damages.
- Uninsured bodily injury insurance coverage: Coverage for peoples' medical bills and other fees if bodily injury is sustained.Â
Learn more about uninsured and underinsured coverage.
How car insurance premiums are calculated
Every car insurance company looks at a driver's complete profile to set the policy's rates. A driver's profile includes several factors, some of which are in their control: maintaining a good driving record or driving an affordable car to insure. The amount a driver pays for insurance is based on several factors, including location, age, gender, marital status, credit score, vehicle, and auto insurance and driving history. The less risk posed by a client to an insurance provider, the lower their premium will be. Let’s dive deeper into insurance rating factors and how each can affect your car insurance premium.Â
Demographics and auto insurance rates
Insurance companies also take into consideration applicants' age, gender, credit score, marital status and homeownership status. Insurers use this information in an attempt to understand the risk posed by a client in order to assign an insurance rate.
In states that allow insurance companies to use credit score as a rating factor, your credit history can have an effect on your insurance premiums. Drivers with a higher credit score are more likely to be offered a lower rate than those with a poor credit history, as data shows that drivers with poor credit file more claims than do drivers with better credit.Â
The age groups with the highest premiums are teens and seniors. This is because, statistically, these groups are at the highest risk for accidents. Premiums for these populations tend to be much higher than drivers aged 25-60.
Industry data shows that single drivers are twice as likely to experience injury in accidents as married drivers, which is why marital status is accounted for in premiums. Additionally, married people are frequently required to be listed on their spouse’s insurance policies; if your spouse has a positive driving profile, this could mean lower premiums. Similarly, if their rating factors indicate a high risk, your rates could be costly.Â
Gender is taken into account more so in young drivers than experienced ones. On average, a male teen driver pays $754 more per year in auto insurance premiums than does a female teen driver. Again, this is because car insurance companies see young male drivers as more likely to take risks than their female counterparts.Â
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Location and car insurance rates
Auto insurance is regulated by each U.S. state and priced based on the ZIP code in which a driver resides. If a state requires its drivers' basic minimum coverage to be high, its residents may face higher insurance costs.
Car insurance is priced by ZIP code to help insurance companies adjust for the external rating factors associated with each area. Insurance costs are higher in locales with more drivers. ZIP codes prone to floods, wildfires, crimes such as vandalism or theft, or other risks also face higher rates. In many cases, those in rural areas pay less in car insurance premiums than do their urban counterparts.
Some states that are considered no-fault require personal injury protection (PIP) coverage, which costs more. This is one reason car insurance in Florida tends to be expensive. Because Florida is a no-fault state with high PIP insurance requirements, residents are forced to pay more for auto insurance than are drivers in other states. At the ZIP code level, higher rates of claims could lead to a pricier car insurance premium, as an insurance company adjusts for the increased likelihood of accidents and the greater probability of claims payouts.
Insurance history and insurance pricing
Insurance companies prefer to insure drivers with reliable insurance histories. A lacking or incomplete insurance record can be a red flag to an insurance company. Insurance companies see drivers with a long history of high insurance limits as financially responsible, and therefore a lower risk than a driver without a positive insurance history.
Car insurance companies see a driver's past as an accurate predictor of their future performance. A history of tickets or violations will inflate the cost of current and future insurance premiums.Â
Insurance rates on a brand new sports car will be more expensive than premiums for an old Civic. If a vehicle costs more to replace, the insurance company will charge you more each month to cover these potential costs (via collision and comprehensive coverage). Additionally, insurance providers may take car ownership status into account as well, and rate based on whether your vehicle is owned, financed, or leased. Find car insurance rates by vehicle type.
Unless you are a brand new driver, insurance companies see a lack of continuous coverage as an indicator of higher risk. In an insurance company's estimation, if you were licensed but didn't have insurance, you may have been driving while uninsured.
Coverage levels and insurance pricing
The more coverage you carry, the more expensive your premiums will be. The cost difference between the lowest levels of car insurance coverage and the highest can add up to more than $1,000 annually. The reason for this is simple: if you carry more coverage, your insurance company is obligated to pay out to meet a higher coverage limit.
Full coverage insurance includes comprehensive and collision protection, which is not typically included in a liability only policy and therefore means higher premiums for these additional coverages.
Your insurance premium will vary based on which deductible you select. Choosing a higher deductible means lower insurance rates, but you will have to pay more out of pocket if you get in an accident.Â
How to save on car insurance premiums
While rating factors do exist and are difficult to change, there are a few steps you can take to make sure you are getting the best rate possible for your situation. Follow the steps below to help lower your insurance costs.
Compare quotes with multiple companies
Insurance comparison websites like The Zebra compare rates from hundreds of companies, taking your unique needs and rating factors into account. Getting several quotes from different insurers allows you to see which company is able to offer you the lowest rate for your situation. The Zebra has compiled resources to help you find car insurance quotes from the top companies in the country. Review this guide to car insurance quotes for more information on quotes and finding a policy.
Inquire about discounts
Almost all insurance carriers offer a list of possible discounts that you may qualify for to help lower your premium. Understanding which discounts companies offer and which apply to you could save you from paying higher premiums.
Bundle your policies
If you have other insurance needs like homeowners, renters, or mobile home insurance, bundling a second insurance product with your auto carrier is an easy way to save on premiums. Multi-policy discounts offer some of the highest discount percentages available.
Improve your driving record
One of the simpler rating factors you have control over is your driving record. Practicing safe driving habits and avoiding violations can improve your driving record and tell insurance companies that you pose a lower risk, resulting in lower premiums.Â
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Improve your credit score
Like your driving record, your credit score is one rating factor that is within your control. Paying bills on time and increasing your credit score will lower car insurance rates.
Consider telematics
If you are a safe driver or trying to improve your record, many companies offer usage-based telematics programs. With these programs, your driving habits are tracked by either a mobile app or an installed GPS device in your vehicle. By tracking how you drive, companies are able to offer discounts on your next policy period if you have proven to be a safe driver.
FAQs
How to calculate car insurance rates
Remember that car insurance estimator tools are good for getting a rough idea of what you should be paying, but your final rates will likely vary. For this reason, it's a good idea to cast a wide net and get more accurate quotes from as many companies as possible. The Zebra's goal is to match you with the best insurance coverage: an auto policy that suits your financial situation and your coverage needs.
The Zebra offers more options than your average insurance agent, which can come in handy if you’re seeking insurance savings. The more insurance companies you research, the more you save and the better coverage you find. If you want to find the best coverage for your money, look no further than The Zebra's car insurance calculator. Let us help you out — by using our auto insurance calculator, you can compare rates from leading companies in order to make sure you're getting the best rate. And you don't even have to leave your couch.
Compare car insurance quotes and find the right coverage today.
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About The Zebra
The Zebra is not an insurance company. We publish data-backed, expert-reviewed resources to help consumers make more informed insurance decisions.
- The Zebra’s insurance content is written and reviewed for accuracy by licensed insurance agents.
- The Zebra’s insurance content is not subject to review or alteration by insurance companies or partners.
- The Zebra’s editorial team operates independently of the company’s partnerships and commercialization interests, publishing unbiased information for consumer benefit.
- The auto insurance rates published on The Zebra’s pages are based on a comprehensive analysis of car insurance pricing data, evaluating more than 83 million insurance rates from across the United States.