Average Cost of Car Insurance In The US

ByJulija A.
August 12, 2021

Risk is an inherent part of our everyday lives. Insurance cannot reduce it, but it can mitigate many of its effects, especially when talking about material damages. The car industry has always had a high demand for insurance. In 2018, there were about five million crashes involving property damage in the US alone and 1.8 million injuries. This highlights just how important car insurance is. But just what is the average cost of car insurance in the US? Read on to find out. But first, let’s talk some more about why you should have auto insurance in the first place.

Why Is Car Insurance Important?

  • It provides security and safety to people and property.

With car insurance, you cannot protect yourself from accidents. What you can do, though, is absorb the financial losses that occur with those accidents.

  • It provides support to families in the event of emergencies.

Accidents are usually unforeseen. They have a penchant for coming at the most inconvenient times. Car insurance helps provide a safety net in these emergencies.

  • It helps to spread the risk of loss.

The risk of loss is spread among many parties instead of being heaped on just one party.

What Is The Average Cost of Car Insurance In the US?

Car insurance costs tend to vary by the hundreds, sometimes even thousands of dollars and usually depend on the unique circumstances relevant to each insurance policy. That’s why it is always advisable for people seeking car insurance to compare the available rates and find the insurance companies for their needs.

Sometimes your location can affect the cost of an insurance policy for your car. Take, for instance, how the cost of insurance in California differs from rates in Arizona or New Jersey.

Other times, your occupational status can determine the insurance costs. For example, if you’re a college student, you are statistically more prone to causing accidents, so your insurance premiums will be higher. 

With that said, the average cost of car insurance in the US  stands at $1,674 per year for full coverage. As we mentioned before, the costs for car insurance are heavily determined by a range of factors from the driver’s age and location to past driving records, the age of the vehicle etc. Individual quotes differ by insurance provider too, so the overall results vary greatly.

Another factor you should consider is how comfortable you are with your vehicle coverage and what you can afford to pay for car insurance. Some individuals may own older or unfinanced vehicles and may therefore feel comfortable with just having the minimum insurance coverage stipulated by their state of residence. 

The average minimum auto insurance rate (minimum-coverage auto insurance) for drivers in the United States currently stands at $565 per year. 

The average monthly car insurance for full coverage in the United States works out to about $139.50 per month, while the bare minimum will set you back around $47.

Should You Opt For Minimum or Full Coverage?

While many people are comfortable getting the most basic auto insurance available, experts instead recommend that you opt for full coverage if you can. The reason is that it offers much better financial protection when it comes to making a claim. Of course, you may never need to make a claim on your insurance policy in the first place. If there are no accidents, and that might look like unnecessary money. However, it could also happen, and it’s frankly much better to be prepared if you can afford it.

Here are some key facts about average auto insurance rates:

  • According to the last five years of data on insurance rates, the cost of car insurance has increased by 4.68%, indicating a global rise in car coverage costs.
  • According to NHTSA data from 2010, crashes involving motor vehicles cost almost a trillion US dollars a year ($836 billion, to be precise).
  • Average car insurance rates by driver age get more expensive the younger the driver is. According to Statista, the average cost for 18-year-old male drivers in 2021 was about 7,762 US dollars, while for 18-year-old female drivers, it was about 7,030 US dollars.
  • The car insurance price is significantly influenced by existing traffic offences. For instance, driving under the influence of alcohol (DUI) increases annual premiums by around $1,465. Speeding tickets increase average premium prices by $388, and previous at-fault incidents bump up average premiums by about $637.
  • Conversely, insurance premiums cost less the older the policy taker is. For example, the average auto insurance expenditure for 25-year-old drivers in the United States in 2021 was around $2,183 US dollars per year for males and $2,036 for females. For comparison, 18-year old males had to pay as much as $5,727 while females also had an eye-watering $4,983. That’s double what both men and women in their 60s would have to pay combined.

Car Insurance Rates by State

Having established that numerous factors influence the prices of car insurance premiums, it is little surprise that these can vary a great deal. Another factor that affects prices is the state and city you are getting insured in. Let’s take a look at some of the most expensive states and those that offer the best rates in the United States.

States With the Highest Rates

As of March 2021, Louisiana offers the most expensive average car insurance rates at $2,724 per year, followed by Florida with $2,364 and New York with $2,321 per year.

States With the Lowest Rates

States like Maine, Ohio, and Idaho had the lowest premiums at $965, $1,034 and $1,045 per year, respectively. 

Differences in average car insurance premium cost in these states can be attributed to certain factors, such as no-fault car insurance policies, which drive up the rate of claims. There are also factors such as natural disasters occurring in the state or the percentage of uninsured drivers. Unfortunately, the average economic situation in each state plays all too little of a factor, with people in poorer states like Louisiana and Florida still having to contend with higher-than-average premiums for car insurance.

Other Factors Determining Car Insurance Rates

Auto insurance companies consider several factors when they need to determine individual costs of car insurance. The average car insurance cost can be affected by everything we’ve already mentioned, including local regulatory requirements, type of vehicle, driver’s age, traffic records, and gender. In addition to those requirements, the following factors might also be considered:

Credit Rating

We already know that a bad credit score will keep you from accessing many good things in life. A poor credit score indicates that a driver will file more claims than a driver with better credit. In essence, a better credit score will likely give you lower premiums on your car insurance. 

It’s not all doom and gloom, though. Where a driver ranks on the insurance credit tier is still determined differently by auto insurers in different states. Some, such as those in Michigan, Massachusetts, Washington, Hawaii and California, do not consider credit scores when determining average automobile insurance rates. 

Selections on Coverage

The coverage options you choose on your car insurance policy can significantly influence the rates you have to pay. For instance, if the coverage selections you have on your policy include lower deductibles, higher liability limits, or let you take advantage of optional coverages, then you will almost certainly have to pay higher premium rates.

How to Save Money on Car Insurance

As essential as car insurance is, you don’t always have to pay premium bucks to get a good plan. Many providers give discounts that lower the amount you have to spend on insurance premiums. Just how much is taken off is dependent on the particular provider. Saving money on the average cost of car insurance isn't so hard either, considering the number of standard discounts that you can get from most providers. Before signing a policy, it would be prudent to ask your insurance agent how many money-saving options are available.

Some of the standard discounts you may get are:

  • Discounts for good students: many companies give discounts to students with good academic records. As a student, you should also look out for student-friendly insurance companies when choosing your next car insurer.
  • Claim-free: if you’re a driver with no claims on record in several years, you are usually eligible for savings on your next policy.
  • Full premium payment: paying premiums in full can help reduce the average car insurance policy costs.
  • Insurance policy bundling: when you bundle more than one policy together, such as a home insurance policy with auto insurance, you may be able to get a discount on either or even both of them.

As always, what discounts you may get or are eligible for differ depending on the insurance provider you opt to cast your lot with. That’s why it’s always important to speak with multiple representatives first, so you are open to as many opportunities as possible. Finding a cheap insurance plan with a trusted provider is not easy, but it’s worth putting in the extra effort for a policy you’ll be satisfied with.

Bottom Line

If you’ve been reading our article carefully, you already know how difficult it is to answer a seemingly “simple” question such as “How much does car insurance cost”? There are numerous factors to consider, and everything from the driver’s age to the car’s mileage can have some bearing on the final price of the car insurance premium.

However, as daunting as it may seem, getting a good insurance policy for your car is really not all that hard. You just need to be on the lookout for a good deal and consider all possible angles. Just remember: it’s not worth skimping out on proper car insurance, but don’t get tricked into overpaying for services you won’t need, either.

FAQ
How much does insurance for a car cost a month? +

The average car insurance cost per month in the US is currently at around  $139.50 if you want full coverage.

How much does car insurance cost in the USA? +

The average rate in the US is currently at $1,674 per year.

What states have no car insurance? +

It’s impossible to find a state in the United States that has no car insurance whatsoever. However, where most states in America make car insurance mandatory, Virginia and New Hampshire stand out as two that do not force their residents to have car insurance.

What state has the cheapest car insurance? +

Using the average cost of car insurance in the US as a metric, the states with the cheapest rates for car insurance are Maine, Ohio, and Idaho.

How do I get the best deal on car insurance? +

To reduce costs on your insurance rates, you should look at as many options as possible first. Consider higher deductibles, bundle your policies (buy multiple policies from the same insurer), maintain a good credit score, think about getting group insurance, ask about all of the possible discounts, and compare insurance costs between old and new cars.

About author

Albert Einstein is said to have identified compound interest as mankind’s greatest invention. That story’s probably apocryphal, but it conveys a deep truth about the power of fiscal policy to change the world along with our daily lives. Civilization became possible only when Sumerians of the Bronze Age invented money. Today, economic issues influence every aspect of daily life. My job at Fortunly is an opportunity to analyze government policies and banking practices, sharing the results of my research in articles that can help you make better, smarter decisions for yourself and your family.

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