Auto Insurance Costs: How Much Coverage Do You Need?

The cost of auto insurance varies depending on factors such as location, age, gender, driving history, and the type of vehicle. In the US, the average monthly cost of car insurance is $124, while the average annual cost is $869 to $2,681. In some states, such as Michigan, the average cost of car insurance is higher, with an average monthly premium of $304. On the other hand, states like Maine offer more affordable rates, with an average monthly premium of $150. The cost of auto insurance also depends on the level of coverage, with minimum coverage policies costing less than full coverage policies. Additionally, factors such as age and driving history can significantly impact insurance rates, with younger and less experienced drivers often paying higher premiums.

How much is auto insurance for young drivers?

Auto insurance for young drivers can be expensive, with teens and young drivers paying twice as much for insurance as 35-year-olds. The cost of insurance for young drivers varies depending on factors such as age, driving experience, gender, and the state in which they live.

Cost of Auto Insurance for Young Drivers

The average cost of adding a teenager to a car insurance policy is $3,824 per year, according to NerdWallet's analysis of full-coverage rates for 16-year-old drivers included on a two-parent or guardian auto insurance policy. The cost of insurance for young drivers can vary depending on the state, with Connecticut, Louisiana, Nevada, and New York being some of the most expensive states for teen car insurance. On average, 16-year-olds pay $5,769 for full coverage or $2,706 for minimum coverage per year.

Factors Affecting the Cost of Auto Insurance for Young Drivers

One of the main factors affecting the cost of auto insurance for young drivers is their lack of driving experience, which makes them more likely to be involved in accidents. Young drivers are also more likely to engage in risky driving behaviors such as speeding, tailgating, and not wearing a seatbelt. In addition, young drivers typically lack a credit history, are unmarried, and have not completed as much education, all of which can increase car insurance rates.

Ways to Save on Auto Insurance for Young Drivers

• Stay on a parent's policy: Adding a teen to an existing policy is typically less expensive than a young driver buying their own coverage.
• Look for discounts: Insurance providers offer several discounts such as good student discounts, student away at school discounts, driver's education discounts, and defensive driving course discounts.
• Choose a higher deductible: Raising your deductible can decrease your premium, but keep in mind that teens are more likely to file a claim.
• Choose the right car: Insurance rates are higher for high-end and sports cars. Consider buying a used vehicle in good condition that doesn't require comprehensive coverage.
• Take advantage of usage-based insurance: These programs use telematics devices to monitor driving habits and offer discounts for safe driving patterns.

How much is auto insurance for those with a poor credit score?

The cost of auto insurance for those with a poor credit score varies depending on location and the insurance company. However, on average, drivers with poor credit pay significantly more for auto insurance than those with good credit.

In states that allow credit to be used as a pricing factor, drivers with poor credit can expect to pay up to 137% more for auto insurance than those with good credit. This translates to an average increase of $1,180 per year. In some states, such as New York, poor credit can more than double insurance costs.

The use of credit in determining auto insurance rates is controversial. Critics argue that it is unfair to base auto insurance rates on credit score as it cannot predict a driver's accident risk. Additionally, there is a lack of awareness about the use of credit-based insurance scores, and consumer advocates have pushed back on the use of credit information to set rates.

Despite the controversy, about 95% of auto insurers use credit-based insurance scores to determine car insurance rates. This is because research shows that drivers with poor credit are more likely to file insurance claims, making them higher-risk and potentially more expensive to insure.

While a poor credit score can significantly impact auto insurance rates, there are ways to mitigate these costs. Shopping around and comparing rates from multiple insurance companies can help find lower rates, even for those with poor credit. Additionally, improving one's credit score over time can also lead to reduced auto insurance premiums.

How much is auto insurance for those with a good credit score?

Auto insurance companies use a credit-based insurance score to determine whether to take you on as a policyholder and the premium you'll pay. While it's only one of many factors that go into determining your rate, having good credit can help you save money.

In most states, your insurance score can play a role in determining what you will pay for your car insurance premium. Research shows that individuals with better credit history are less likely to file a claim against their insurance company, and carriers often reward customers who are less likely to file claims with a preferential rate.

According to Bankrate's research, someone with an excellent credit score of 800 or above pays an average annual rate of $2,031 for full-coverage car insurance. On the other hand, drivers with poor credit pay 115% more for full-coverage car insurance than those with excellent credit.

The use of credit-based insurance scores to calculate rates is legal on the federal level, but four states—California, Hawaii, Massachusetts, and Michigan—ban companies from using your credit report to determine insurance rates. Instead, companies in these states base rates on your driving record, location, and other characteristics.

While credit-based insurance scores are not available for consumers to see, you can get a free annual credit report from the three major credit reporting bureaus at AnnualCreditReport.com. You can also take steps to improve your credit score, such as paying your bills on time, keeping your credit utilization below 30%, and getting a credit card if you don't have one, but keeping spending low.

How much is auto insurance for those with a DUI?

Auto insurance for those with a DUI can be more expensive and harder to find. A DUI conviction can double your car insurance rates and you will likely be considered a high-risk driver. The average cost of car insurance with a DUI is $3,655 per year, which is an increase of around 84% or $138 per month. However, rates vary by state and insurer, with Progressive and USAA offering the cheapest average rates.

After a DUI, you will likely need to file an SR-22 form to prove you have insurance. This is not an insurance policy but a form filed by your insurance company that confirms you have the minimum required insurance. An SR-22 is required in most states and must be maintained for a certain period, typically three to five years. Failure to maintain continuous insurance during this time will cause the SR-22 clock to reset.

In Florida and Virginia, an FR-44 certification is required instead of an SR-22. This also confirms that you are carrying the minimum required insurance.

In addition to increased insurance costs, a DUI conviction carries other penalties such as losing your license, fines, probation, or jail time. It is important to note that a DUI will stay on your criminal record for life, although it typically affects your insurance rates for three to five years.

To find cheaper insurance after a DUI, it is recommended to shop around and compare rates from multiple insurers, as they calculate premiums differently. You can also consider strategies such as bundling policies, increasing your deductible, or adjusting your payment method. Maintaining a clean driving record after a DUI can also help lower your rates over time.

How much is auto insurance for those with an at-fault accident?

An at-fault accident can have a significant impact on your auto insurance rates, and the increase can vary depending on several factors. On average, car insurance rates tend to go up by around 45% to 49% after an at-fault accident. This increase reflects the higher risk associated with insuring a driver with an at-fault accident on their record. The exact amount your premium will increase depends on various factors, including your insurance provider, driving record, geographic location, age, and gender.

According to a study by MarketWatch, a driver with a clean driving record and good credit can expect their full-coverage car insurance rates to increase from $2,008 per year to $2,919 per year after an at-fault accident, a climb of 45%. However, drivers with previous speeding tickets or accidents will likely pay even more. The same study found that State Farm offered the lowest rate for drivers after an accident, with an average annual premium of $1,953.

NerdWallet's analysis of insurance rates revealed that a driver with an at-fault accident pays $808 more per year for full coverage, on average, compared to a driver with no traffic violations. The impact of an at-fault accident on insurance rates can last for at least three years, and in some cases, it may stay on your driving record for up to five years. During this time, your insurance company may surcharge your rates, resulting in higher premiums.

It's important to note that not all insurance companies handle accidents in the same way. For example, Progressive offers small accident forgiveness for claims under $500, and large accident forgiveness if you remain accident-free and violation-free for five years. USAA, which caters to military members and their families, also offers accident forgiveness after five years of being accident-free.

To mitigate the impact of an at-fault accident on your insurance rates, you can consider the following strategies:

• Shop around and compare rates from different insurance companies.
• Improve your credit score, as it can influence your insurance rates in most states.
• Increase your deductible, which will lower your premium but result in higher out-of-pocket expenses if you need to file a claim.
• Look for discounts and take advantage of any that you may be eligible for, such as good student discounts or multi-policy discounts.
• Consider usage-based insurance, which monitors your driving behaviour and offers discounts for safe practices.

Frequently asked questions