After spending countless hours finding your perfect car, choosing the right auto insurance is a significantly less exciting task. Still, it’s a necessary evil when it comes to the world of automotive care, as it is legally required to have (except a handful of states). While it's hard to say choosing your auto insurance is as exciting as picking out your dream car, there are some things you can do to make the process as painless and simple as possible. Let’s get started.
In this article, we'll answer these questions:
- Your and any drivers on the policy driver’s license and personal information: This includes date of birth, addresses, living situation, and marital status.
- Your Car: The VIN of your or a potential vehicle—every vehicle, regardless if it’s from a private seller or still at a dealership has a VIN. It's unique to every vehicle and tracks the individual history of the vehicle. If you can’t provide an exact VIN, make sure you can at least provide the year, make, and model.
- Date of purchase
- Name of registered owner
- Driving History: Your and any drivers recent driving history including accidents, citations, claims, or completed driving courses.
- Insurance Record: Some insurance companies require you have six months to a year of continuous auto insurance prior to issuing a policy with you. So, make sure you have an idea of your insurance background.
Don’t be fooled by “free” quotes
Lots of insurance companies advertise their ability to give free quotes. Any auto (or home and renters, for that matter) quote you receive is and should be free. When shopping around for insurance, make sure you don’t fall for their advertisements of “free.”
What goes into your quotes
After getting your car insurance quote, you might wonder what exactly they are factoring in. There are many things that go into your rate that are dependent and independent of you. But, the general factors of insurance are based on where you live, who you are, your insurance, how you drive, and what you drive.
Where you live
Because insurance is regulated on a by-state basis, state legislation can influence the ways insurance companies do business in certain states. In Michigan, for instance, state regulation requires an unlimited amount of Personal Injury Protection coverage; this is not the case in any other state. This and other state regulations are what causes insurance premiums to be quite high in Michigan, for example. Below is our State of Insurance analysis, featuring the most expensive and least expensive states to get auto insurance. Although we have this broken down by state, insurance quotes are determined as granularly as your zip code.
Least Expensive States for Auto Insurance
Most Expensive States for Auto Insurance
- Michigan - $2,087
- Delaware - $2,073
- Oklahoma - $1,990
- Kentucky - $1,925
- Texas - $1,762
- New Jersey - $1,746
- Louisiana - $1,741
- Florida - $1,690
- Rhode Island - $1,671
- Connecticut - $1,625
Furthermore, insurance companies base their quotes on risk
which can be impacted by the number of claims in a certain area. So, if you live in an area experiencing a high amount of claims, your company could raise your rates to reflect their financial burden—regardless if you have filed a claim or not.
The last part of this “where you live” segment is based on population size. Statistically, if you live in an area with a high number of people, you are more likely to be in an accident than someone living in a rural area.
Who you are
The aspect of "who you are" to an insurance company breaks down into your gender, age, marital status, homeowner status, your education, and credit score.
While the amount is small, with women saving an average of $1 of the annual premium, gender is still a rating factor for all but 5 states for insurance companies. The reason behind this comes back to the anticipation of risk—insurance companies use historical forecasting to better predict and price risk. Their historical forecasting tells them that, statistically, men are more likely to take risks when it comes to driving. Men pay more in 34 states whereas women pay more only in 12. The 5 states that don’t use gender as a rating factor as Hawaii, Massachusetts, Montana, North Carolina, and Pennsylvania.
Statistically, a young driver is less experienced and thus more likely to receive a citation or cause an accident. In the eyes of an insurance company, that means more risk and a greater need for financial protection— i.e., higher premiums for youthful drivers. However, once you turn 19 and again after you’re 25, your insurance rate begins to decline as the likelihood of you driving dangerously decreases. This remains consistent until you get into your 60s, where your rate begins to increase.
National Average Annual Auto Insurance Premiums by Age Range
||Avg. Annual Premium
If you’re married, you can expect a cheaper rate than those who are single, divorced, or widowed. This is because, statistically, insurance companies have found that married couples file fewer claims and thus pose less of a financial risk to insure.
On average, renters pay more for auto insurance than homeowners, about $31-69 per year. Homeowners are considered more financially stable, and thus less likely to file a claim which insurance companies reciprocate with a discounted premium.
National Average Annual Insurance by Homeowner Status
||Renter with Multi-Policy
||Homeowner with Multi-Policy
Although it’s not hugely impactful, drivers who held a Ph.D. save $36 per year on their auto insurance premium than those without a degree. Insurance companies see clients with higher education levels as less risky to insure and again, reward that decreased risk with a lower premium. The only states that do not consider education when determining rates are California, Massachusetts, and Montana.
National Average Annual Auto Insurance Premiums by Level of Education
Unlike your education level or gender, your credit has a big impact on your insurance rate. Drivers with poor credit (524 or below) pay more than twice what those with excellent credit (823 or more) pay for auto insurance. Again, this has to do with how insurance companies view drivers with poor credit in terms of risk. Typically, a driver with poor credit is more likely to file a claim than a driver with excellent credit. Moreover, when a claim is filed by a driver with poor credit, the claim payout by the insurance company tends to be higher. Insurance companies cover their risk by charging those with poor credit scores higher rates.
National Average Annual Auto Insurance Premiums by Credit
Your past insurance
It’s important to consider your insurance history and how it reflects on your current insurance premium. Having gaps in insurance or having the bare minimum coverage can increase your rate as insurance companies see you as financially unstable and thus risky to insure. Having a long insurance history with high limits can help lower your insurance premium going forward.
National Average Annual Auto Insurance Premium by Insurance History
||Avg Annual Premium
|1 Year with 50-100 BI Limit
|3 Years with 50-100 BI Limit
|1 Year with 100-300 BI Limit
|5 Years with 50-100 BI Limit
|3 Years with 100-300 BI Limit
|5 Years with 100-300 BI Limit
How you drive
The "how you drive" component of your insurance breakdown covers 3 main aspects: primary vehicle use, annual mileage, and driving violations.
Primary Vehicle Use
How you choose to use your vehicle can have effects on your rates. Using your vehicle for pleasure, what most people typically insure their vehicle as your average premium hovers around $1,323. However, if you are a traveling salesman and use your vehicle for that purpose, your average auto increase can increase $152 per year.
Annual mileage is a tricky aspect for insurance companies to cover. If you live in California, the only state that factors annual mileage into your rate, it’s less of a gray area. On average, there is a 25% premium increase in average annual premium between those who drive 0-7,500 miles per year and those who drive more than 15,000— about $370 per year.
Things like speeding tickets, DUIs, and other violations can drastically increase your premium. Of the major driving violations, a DUI can raise your rate as high as 80%— with some states seeing an increase of 350%. If you have a poor driving history, you can expect insurance companies to charge you accordingly.
National Average Annual Auto Insurance Premiums by Driving Violations
||Avg Annual Premium
||$ More Paid vs No Violation
|Cell Phone Violation
|Texting while Driving
|Speeding 6 - 10 MPH Over Limit
|Speeding in School Zone
|Speeding 11 - 15 MPH Over Limit
|Speeding 16 - 20 MPH Over Limit
|Speeding 21 - 25 MPH Over Limit
|In 65 MPH Zone
What you drive
Naturally, a big factor in your insurance rate is your automobile. Vehicles that are built for performance, with high MSRP (manufacturer's suggested retail price) and foreign built models tend to be costlier to insure. Vehicles that don't cost as much to repair or aren't built for riskier driving (i.e., powerful engines), such as a van or sedan, are correspondingly cheaper to insure.
Here are the least expensive vehicles to insure:
- Sedan: Chevrolet Cruze at $1,376 yearly
- Truck: Toyota Tacoma at $1,363 yearly
- SUV: Honda CR-V at $1,232 yearly
- Van: Honda Odyssey at $1,260 yearly
- Luxury Car: Acura RDX at $1,429 yearly
- Hybrids/Electric car: Toyota Prius at yearly $1,469
The main idea here is that insurance companies attempt to predict the risk you and your vehicle pose before offering a rate. Keeping in mind the factors we just covered, the more risk you appear to your insurance company, the more you will be charged. Obviously, when it comes to things like your age, marital status, and homeowner status, there isn't much you can change. But shopping around for car insurance every 6 months as well as maintaining good credit and a clean driving record are ways to ensure you are getting the best possible rate.