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.
Make sure you have all the necessary information! If you want the most accurate information, have the following items ready for your quote:
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.”
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 history, how you drive, and what you drive.
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. 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.
Most Expensive States v Cheapest States by Average Annual Premium
|Most Expensive States||Least Expensive States|
|Michigan - $2,087||Ohio - $764|
|Delaware - $2,073||North Carolina - $817|
|Oklahoma - $1,990||Idaho - $919|
|Kentucky - $1,925||Maine - $937|
|Kentucky - $1,925||Iowa - $971|
|New Jersey - $1,746||Indiana - $996|
|Louisiana - $1,741||Virginia - $1,002|
|Florida - $1,690||Illinois - $1,003|
|Rhode Island - $1,671||Massachusetts - $1,004|
|Connecticut - $1,625||Utah - $1,015|
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.
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.
Average Annual Premium in 2016
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.
|Age Group||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.
National Average Annual Insurance by Homeowner Status
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
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
|Insurance History||Avg Annual Premium|
|1 Year with 50-100 BI Limit||$1,356|
|3 Years with 50-100 BI Limit||$1,323|
|1 Year with 100-300 BI Limit||$1,317|
|5 Years with 50-100 BI Limit||$1,311|
|3 Years with 100-300 BI Limit||$1,287|
|5 Years with 100-300 BI Limit||$1,276|
The "how you drive" component of your insurance breakdown covers 3 main aspects: primary vehicle use, annual mileage, and driving violations.
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.
Average Premium by Vehicle Use
|Work/Commute, less than 10m||$1,329|
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.
Average Increase in Annual Premium in 2016
|Accident/Violation||6 Month Premium Increase|
|Speeding 11 - 15 MPH Over Limit||$141|
|Speeding 16 - 20 MPH Over Limit||$153|
|Speeding 21 - 25 MPH Over Limit||$165|
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.