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How Much Does Car Insurance Cost?

The average cost of car insurance isn’t an easy statistic to find. The answer depends on a number of factors, from your age to where you live to your driving history. For example, if you are 16 years old and getting insurance on your own, car insurance will cost a whopping $8,226 a year. But at age 45, you’ll pay just $1,929 per year for the same insurance. According to a 2014 study by Quadrant Information Service, the annual average car insurance cost in the United States is about $900 per year.

Where you live also has a big impact on how much you pay for car insurance. As reported by Value Penguin in 2018, West Virginians paid an average annual car insurance of $2,518. In Virginia, drivers paid just $1,114 per year. Overall, Americans paid an average of $900 per year for insurance. So how exactly is car insurance calculated—and how can you save money on car insurance?

Average Car Insurance Cost

According to car insurance giant Progressive, the average cost of car insurance varies widely across the country. In the report by Progressive, we can see the average car insurance rate by state. The research broke down states into three categories: low cost, medium cost, and high cost.

Low Cost States

The low cost states include Idaho, Indiana, Iowa, Kansas, Maine, Minnesota, Montana, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Dakota, Vermont, Wisconsin, and Wyoming.

With an average monthly premium price of $137, drivers in these states get cheaper car insurance given their location (away from the coasts) and better weather. These states also tend to have fewer people, which leads to fewer accidents, low crime rates, and less dangerous intersections. Finally, insurance requirements in these states are minimal, which means that insurance companies can offer lower-cost options.

Medium Cost States

The medium cost states include Alaska, Arizona, Alabama, Arkansas, Hawaii, Illinois, Kentucky, Mississippi, Missouri, Nebraska, Nevada, Oregon, Tennessee, Utah, Virginia, Washington, and West Virginia.

In these states, the average monthly premium is $167, due to slightly less favorable weather, higher levels of population, and more crime and dangerous intersections than in the low cost states. In addition, the insurance requirements are higher in these states.

High Cost States

Finally, the high-cost states include California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Louisiana, Maryland, Massachusetts, Michigan, Pennsylvania, New Jersey, New York, Rhode Island, South Carolina, and Texas.

Here, the monthly premium averages $232, which takes into consideration severe weather issues, dense population, higher crime rates, and more dangerous intersections. In addition, these states have stricter insurance requirements, which require higher premiums.

Factors that Affect the Cost of Car Insurance

There are a number of factors that impact the average cost of car insurance for each driver. Insurance companies use statistics to determine the risk posed by each driver—and then use that risk level to set premium prices.

Demographics

First, insurance companies look to your demographics, which include your age, sex, marital status, and location. Essentially, if you are younger, unmarried, and male, you are more likely to engage in risky driving behaviors and file a claim than you are if you are older, female, and/or married. Similarly, location plays a big role in your car insurance rates. People living in states with higher levels of personal injury protection will have more expensive car insurance premiums, as will people living in locations that are more densely populated or that have more cars.

The Car You Drive

Second, the car you drive will affect your insurance rate. Essentially, if you drive a “safe family car,” such as a sedan or a minivan, you are more likely to get a discount on your insurance than if you buy a sports car. You can also get a discount on your insurance by buying a used car and by making sure that your car has safety devices like alarms and anti-lock brakes.

Driving History

Third, your driving history has a major impact on your insurance premiums. This one is simple: if you have a record of traffic violations and/or accidents, it will make your rates soar. Work on clearing up your record to reduce your rates.

Credit History

Fourth, your credit history can impact your insurance premiums. Insurance companies view people with poor credit as bad driving risks, because statistics show that the higher your credit score, the less likely you are to file a claim. By improving your credit health, you may be able to get lower premiums.

Driving Habits

Fifth, your driving habits can also play a role in your car insurance costs. Essentially, the amount that you drive and how you drive will impact your insurance. If you commute into a city every day, your insurance will cost more than it would if you took public transportation or worked from home.

Coverage and Deductible

Sixth, the level of coverage that you have and your deductible will affect your premiums. The higher your coverage limits, the more expensive your insurance will be. While you can reduce your premium costs by requesting a high deductible, remember that this will require you to pay more out of pocket if you have an accident.

Additional Coverage

Seventh, the type of car insurance that you have will impact its cost. While you are likely required to have certain coverage by law, you may not need other types of coverage. Carefully evaluate your policy to make sure that each type of insurance coverage is necessary before signing a policy.

>> Read MoreComprehensive vs. Collision Car Insurance Coverage

How to Save on Car Insurance

Saving on car insurance can be difficult, given that many of the factors discussed above—like your age, gender, and marital status—can not be changed, or at least not right away. However, there are steps that you can take to save on your insurance.

The most important thing to do is to compare the best car insurance companies. Get a number of quotes before buying car insurance using online tools. That will help you be sure that you are getting the best rate.

Next, do your best to lower costs in other ways: maintain a good credit history and do what you can to clean up your driving history. This may mean taking a defensive driving course, which could earn you a discount from your insurance company. You may also be able to bundle your homeowner’s or renter’s insurance through the same company to get a better deal or take advantage of other discounts. You can even reduce optional insurance on older vehicles to increase your cost savings.

There are numerous factors that go into the cost of car insurance, from where you live to who you are to how you drive. While not all of these factors are within your control, there are measures that you can take to reduce your car insurance costs immediately, such as comparison shopping, bundling your insurance, or getting discounts from your insurer. By using these tactics, you can make car insurance more affordable—no matter what your situation is.

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Author: Jeff Gitlen

cost of car insurance author

Jeff Gitlen writes about a wide range of finance topics including everything from student loans to credit cards to small business financing. Jeff's work has been featured on a number of sites including Bloomberg, CNBC, Forbes, Market Watch, and more.