Auto Insurance: How Much Liability Coverage Is Enough?

The cost of car insurance varies depending on several factors, including age, location, driving history, and vehicle type. The national average cost of car insurance is $1,483 per year or $124 per month. However, this can range from $64 per month for minimum coverage to $190 per month for full coverage.

Full coverage car insurance typically includes liability insurance, collision insurance, and comprehensive insurance, while minimum coverage only meets the state's legal requirements. The cost of car insurance also depends on individual factors such as age, with younger drivers paying more than older drivers due to their lack of experience. Additionally, factors such as driving history, credit score, and vehicle make and model can also impact the cost of car insurance. It is recommended to shop around and compare quotes from multiple insurance companies to find the most affordable and suitable policy.

The average cost of car insurance in the US

The cost of car insurance also depends on the insurance company. USAA, Erie, and Auto-Owners are known for offering some of the cheapest rates, with USAA having the lowest average annual rate at $1,335. However, USAA policies are only available to military personnel and their families. For those who don't qualify for USAA, Erie and Auto-Owners are also good options, with average annual rates of $1,532 and $1,619, respectively.

Additionally, certain factors can increase the cost of car insurance. For example, having a poor driving record with accidents, speeding tickets, or a DUI can significantly impact your rates. Similarly, having poor credit can also result in higher insurance costs. On the other hand, being a senior driver, having a clean driving record, and choosing a low-mileage or minimum coverage plan can help keep costs down.

The factors that influence car insurance rates

There are many factors that influence car insurance rates. Some of these factors are within a driver's control, while others are not. Here are the key factors that impact the cost of car insurance:

Age and Driving Experience

Young and inexperienced drivers typically pay higher insurance rates since they are considered to be high-risk and more likely to be involved in accidents. Insurance rates tend to decrease as drivers gain more experience and age, with rates usually reaching their lowest point when drivers are in their mid-50s. However, rates may start to increase again for older drivers aged 70 and above.

Driving Record and History

A driver's history of moving traffic violations, accidents, and DUI/DWI convictions significantly affects insurance rates. A poor driving record indicates a higher risk of filing insurance claims, resulting in higher premiums. Conversely, maintaining a clean driving record by practising safe driving habits can help lower insurance costs over time.

Location and Demographics

The location where the car is driven and parked impacts insurance rates. Urban areas with higher population density, higher rates of theft, vandalism, and accidents tend to have higher insurance rates. Rural areas generally have lower insurance premiums due to reduced risks. Additionally, certain states have higher insurance rates due to factors such as state coverage requirements, accident frequency, and cost of labour and vehicle parts.

Type of Car

The make, model, and age of the car play a significant role in insurance rates. Insurance companies consider the safety ratings, repair costs, theft rates, and comprehensive claims history of similar vehicle models when determining insurance costs. Some vehicles are statistically more likely to be stolen or involved in accidents, resulting in higher insurance premiums.

Credit Score and History

In most states, credit history is a major factor in determining insurance rates. Drivers with poor credit scores tend to file more claims, and their claims are generally more expensive. As a result, insurance companies charge higher premiums to drivers with poor credit. However, it's important to note that the use of credit-based insurance scores is banned in certain states, including California, Hawaii, Massachusetts, and Michigan.

Coverage Selections and Deductibles

The amount and type of insurance coverage selected impact the cost. While minimum coverage may be cheaper, it is essential to ensure sufficient coverage to avoid financial disasters. Collision and comprehensive coverage, medical expense coverage, accident forgiveness, gap insurance, rental reimbursement insurance, and roadside assistance insurance are additional coverage options that influence the overall insurance rate. The chosen deductible amount also factors into the pricing, with higher deductibles resulting in lower insurance premiums.

The cheapest car insurance companies

The cheapest car insurance company depends on your individual circumstances, and each state has different insurance regulations. However, here is a list of some of the cheapest car insurance companies:

• USAA
• Geico
• Erie
• Auto-Owners
• State Farm
• Progressive
• Nationwide
• Allstate
• Farmers
• Amica

How to find the best car insurance rates

The cost of car insurance varies depending on a range of factors, including age, gender, driving history, location, and the insurance company itself. To find the best rates, it is important to compare quotes from multiple companies and consider factors such as coverage needs, discounts, and customer service. Here are some tips to help you find the best car insurance rates:

• Decide on the coverage you need: Determine the level of coverage you require, such as liability, collision, or comprehensive insurance. Consider your vehicle's age, lease or loan requirements, and desired protection in case of an accident.
• View rate comparisons: Compare rates from different insurance companies to find the most affordable option. USAA, Erie, Auto-Owners, and Nationwide are known for offering rates below the national average.
• Research individual insurers: Look into the reputation, customer service, and claims handling of specific insurance companies. Check reviews and ratings to gauge their performance in these areas.
• Get multiple quotes: Obtain quotes from at least three insurers to increase your chances of finding the best rate. Provide accurate information about yourself, your vehicle, and your driving history to receive tailored quotes.
• Shop around: Don't settle for the first quote you receive. Compare rates from a variety of insurers to ensure you get the best deal.
• Consider discounts: Look for insurance companies that offer discounts, such as safe driver discounts, bundling discounts, or discounts for paying your premium in full.
• Maintain a clean driving record: A clean driving record can help lower your insurance rates. Avoid speeding tickets, accidents, or DUIs, as these can significantly increase your premiums.
• Improve your credit score: In most states, your credit score can impact your insurance rates. Work on improving your credit score to qualify for lower premiums.
• Increase your deductible: Opting for a higher deductible can reduce your insurance costs, but keep in mind that you'll need to pay more out of pocket when filing a claim.
• Bundle your policies: Consider bundling your car insurance with other types of insurance, such as home or renters insurance. Many companies offer discounts for multiple policies.
• Compare rates regularly: Insurance rates can change over time, so it's a good idea to compare rates annually or when your circumstances change, such as moving to a new location or purchasing a new vehicle.

How much car insurance is enough?

The amount of car insurance you need depends on your financial situation. Many states have a minimum liability car insurance requirement, which covers bodily injury and property damage to other parties when you're at fault in an accident. However, it won't cover your injuries, vehicle repairs, or damages due to theft, vandalism, natural disasters, and uninsured/underinsured motorists.

To determine how much car insurance you need, you can follow these steps:

• Find your state's minimum coverage requirements.
• If you have a lease or loan, check your lender's coverage requirements.
• Determine the value of your assets, including your car, savings, home, business, or retirement and investment funds.

Your assets matter because if you're underinsured, or the damages you are responsible for exceed your coverage, a court may order you to make up the difference. The cost of additional insurance coverage can be minimal compared to the financial impact of an expensive accident.

The average cost of car insurance is $64 per month, or $767 per year, for a minimum-coverage policy. The national average cost of insurance is $164 per month for minimum coverage or $1,483 per year for full coverage. Your rate will vary based on where you live, what kind of coverage you have, and your driving history.

The Zebra's survey of top car insurance companies found that Nationwide was the cheapest for the average driver profile, with an average rate of $90 per month. GEICO was a close second, at $94 per month.

Age is a major component of auto insurance premiums. Teen drivers pay the most — about $381 per month for drivers between 16 and 19 years old. Once you turn 20, you should expect an average monthly drop in your insurance premium by about $224.

The more you drive, the more likely you are to get in a car accident. This is why high-mileage drivers often pay more for car insurance than low-mileage drivers.

Your credit score also has a big impact on the annual cost of car insurance, but this is a factor you can control. Drivers with good credit pay about 21% less than those with fair credit, which is a difference of about $552 per year.

The risks associated with where you live can impact your car insurance costs. For example, drivers in large, high-traffic cities tend to pay more in premiums than those in rural areas due to more cars on the road and higher vandalism and theft rates.

Younger drivers, especially teenagers, tend to have less experience behind the wheel than older drivers. Insurers relate inexperience to higher risk. Even if you are an experienced driver, your rates will likely increase if you add a younger driver to your policy. According to an analysis of car insurance rates, 35-year-old drivers can pay approximately 20% less than 25-year-old drivers, on average.

The average annual cost of a car insurance policy is $2,068, according to a study by US News. The study found that USAA has the cheapest average annual rate for car insurance at $1,335. However, USAA policies are only available to military community members and their families, so Erie Insurance may be the cheapest option for most drivers, with an average annual premium of $1,532.

Frequently asked questions