Understanding Auto Insurance Policy Fees And Their Costs

The cost of auto insurance is determined by a multitude of factors, including the type of coverage, driving record, location, age, gender, and credit score. The average cost of car insurance in the US is $2,348 per year for full coverage and $639 for minimum coverage, according to Bankrate's research. However, these rates can vary significantly depending on individual circumstances and location. Factors such as driving history, age, and gender influence rates, with young and inexperienced drivers often paying higher premiums. Additionally, location plays a role, with urban drivers facing higher insurance prices than those in rural areas due to higher rates of vandalism, theft, and accidents.

Driving record

Your driving record is a key factor in determining the cost of your auto insurance. The better your driving record, the lower your premium will be. A clean driving record with no accidents, serious traffic violations, or DUIs will result in a lower premium compared to a record with these incidents. Additionally, new drivers without an insurance track record may also pay higher premiums.

Having an at-fault accident on your driving record can significantly impact your insurance rates. On average, drivers with an at-fault accident pay around 44% to 48% more for car insurance than those with a clean record. The increase in premiums can last for three to five years after the accident.

Speeding tickets can also affect your insurance costs. Drivers with a recent speeding ticket may pay around 22% to 27% more for full coverage insurance. Similar to accidents, speeding tickets usually remain on your record for three to five years.

DUIs have an even greater impact on insurance rates. On average, a DUI conviction can increase your insurance rates by 83% to 94% and remain on your record for ten years or more. The surcharge amount varies by state, with higher costs in states like Michigan.

It's important to note that insurance rates are influenced by a combination of factors, including your age, gender, location, credit score, vehicle type, and driving history. Shopping around for insurance and taking advantage of discounts can help mitigate the impact of a less-than-perfect driving record on your insurance costs.

Location

The location where you live can have a significant impact on the cost of your auto insurance policy. The average cost of car insurance varies from state to state, with some states offering cheaper rates than others. This is due to a variety of factors, including accident and claim frequency, the cost of labour and vehicle parts, vehicle theft frequency, and even road conditions.

For example, according to data from 2024, the cheapest states for full coverage auto insurance in the US are:

• Wyoming ($970 per year)
• Vermont ($1,072 per year)
• New Hampshire ($1,136 per year)
• Idaho ($1,162 per year)
• Ohio ($1,220 per year)

On the other hand, the most expensive states for full coverage auto insurance are:

• Florida ($3,090 per year)
• Louisiana ($3,067 per year)
• Texas ($2,567 per year)
• Michigan ($2,418 per year)
• Kentucky ($2,404 per year)

Even within a state, there can be variations in insurance costs depending on the city or zip code. For instance, in Florida, the most expensive zip code for full coverage insurance has an average annual rate of $5,120, while the cheapest zip code has an average rate of $2,111.

Therefore, when considering the cost of auto insurance, it is essential to look at the specific rates for your state, city, and even zip code, as these can vary significantly and impact the overall cost of your policy.

Age

Teens are among the riskiest drivers to insure due to their inexperience on the road. According to the Insurance Institute for Highway Safety, drivers aged 16 to 19 are four times more likely to be in a car accident compared to older drivers. As a result, insurers frequently charge more to insure teen drivers to offset the higher costs associated with teen driving claims. The average cost of car insurance for a 16-year-old is $613 per month for full coverage and $3,192 per year for minimum coverage.

As drivers enter their early 20s, the cost of auto insurance generally begins to drop. By the age of 25, drivers are no longer considered "youthful operators" by insurance carriers, and their premiums may decrease significantly. Throughout adulthood, provided that drivers maintain a safe driving record and make no insurance claims, age-related rates typically level out and remain consistent.

However, as drivers approach their 70s, insurance rates start to climb again. Age-related factors such as slower response times and vision loss can increase the risk of accidents for older drivers. Additionally, as people age, slower recovery and complications from injuries can increase the cost of medical care, which also drives up the cost of medical payments and personal injury protection coverages. An 80-year-old driver pays around $209 per month for full coverage, which is $10 more per month than a 25-year-old.

It is worth noting that age is not the only factor influencing insurance rates. Other factors include location, vehicle type, driving record, credit score, and gender. While age may have a significant impact on insurance fees, it is important to consider these other variables when assessing auto insurance policy costs.

Gender

Statistically, women tend to be involved in fewer and less serious accidents than men, so they often pay less for auto insurance. This difference is most pronounced among young drivers, with men under 25 getting into more car accidents than women of the same age. As a result, young women typically benefit from lower auto insurance premiums. However, as drivers age, the gender gap in rates narrows, and in some age groups, women may even pay slightly more than men.

Recent studies have found inconsistencies in how insurance companies set rates for male and female drivers. For example, a study by the Consumer Federation of America found that a woman driver in Tampa, Florida, was quoted a rate 29% higher than that of a man, while in Oklahoma City, the same woman driver's quote was only 3% higher.

The impact of gender on auto insurance rates is complex and varies by state and insurance company. While gender is a factor, other rating factors, such as driving record, age, and location, also play a significant role in determining auto insurance premiums.

Vehicle type

The type of vehicle you drive has a significant impact on your car insurance premium. The price and availability of parts, the cost of labour, the statistical likelihood of accidents, the amount of damage your vehicle could inflict in a collision, and the vehicle's safety and crash prevention features could all influence how much you pay for coverage.

For example, SUVs, vans, and other large vehicles can reduce the risk of damage to your car and your passengers in an accident. However, they may cause more damage to other vehicles and their occupants, leading to higher liability costs. In contrast, economy cars may be cheaper upfront, but their lack of advanced security features could increase the risk of theft and, consequently, insurance claims.

Additionally, high-end vehicles, such as luxury or sports cars, tend to be more expensive to insure because they often cost more to replace and repair. Electric vehicles (EVs) also tend to be pricier to insure due to the high cost of specialised repairs.

When determining your insurance premium, insurers will also consider the safety ratings of your vehicle. Cars with lower safety ratings may have higher base rates because they are more likely to be involved in accidents and sustain more damage.

Frequently asked questions