Auto Insurance Premiums: Who Pays The Most?

Auto insurance premiums vary across the United States, with some states paying significantly more than others. The state with the highest average car insurance rates is New York, with drivers paying an average of $4,769 per year, while the cheapest state for car insurance is Maine, with an average annual premium of $1,175. The cost of auto insurance is influenced by various factors, including state regulations, weather conditions, road risks, population density, and the number of uninsured drivers.

The make and model of your car

• Vehicle Age: Older vehicles are generally cheaper to insure than newer ones. This is because it costs less to replace or repair an older car compared to a newer one.
• Vehicle Size: Larger vehicles often have higher price tags, which can lead to higher insurance premiums. However, smaller cars tend to be stolen more often and are statistically more likely to be involved in accidents, so a larger vehicle might have a lower premium.
• Engine Size and Performance: Cars with more horsepower may lead to higher premiums as they are associated with riskier driving behaviours like speeding. Additionally, high-performance vehicles are more likely to be involved in accidents.
• Repair Costs: Vehicles with expensive specialised features or those from certain manufacturers, such as German makes (e.g., Volkswagen, BMW, Audi), tend to have higher repair costs, resulting in higher insurance premiums.
• Safety Features: Newer models often have more advanced safety features, which can help reduce your insurance rate. Vehicles with higher safety ratings are generally cheaper to insure.
• Likelihood of Theft: Certain makes and models are more prone to theft, and this can increase your premium. For example, in 2022, rising theft rates for Hyundai and Kia vehicles led to higher insurance premiums for these brands.
• Body Style: Sporty coupe-style vehicles tend to be more expensive to insure than minivans due to a higher likelihood of accidents and more severe damage.
• Technology: Cars equipped with smart technology, like backup cameras and distance sensors, may have higher premiums due to the cost of repairing these features. However, this technology can also contribute to safer driving and reduced premiums.
• Electric Vehicles: Electric vehicles (EVs) tend to be more expensive to insure than standard gas-powered cars. This is because they are relatively new, and insurers have limited risk assessment data, leading to higher premiums. Additionally, EVs are more likely to be totalled after an accident and are costly to repair.

In summary, the make and model of your car play a crucial role in determining your auto insurance premium. Insurers consider factors such as the vehicle's age, size, engine performance, repair costs, safety features, theft rates, body style, technology, and whether it's an electric vehicle when calculating your rate. By understanding these factors, you can make informed decisions when purchasing a new car or selecting insurance coverages.

Your location

State

The state in which you live is one of the most important factors affecting your car insurance rates. Each state has different minimum car insurance requirements, and the more coverage you are required to buy, the more expensive your policy will likely be. For example, Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, and Utah require drivers to carry personal injury protection, which increases insurance costs. As a result, car insurance rates vary significantly across the US, with Florida drivers paying an average of $3,945 per year, while those in Vermont pay only $1,353.

City and ZIP code

The city and ZIP code where you live also affect your car insurance rates. Drivers in densely populated urban areas tend to pay more for insurance than those in suburban or rural areas due to higher risks of theft, accidents, and vandalism. Within cities, insurance rates can vary by up to 91% depending on the ZIP code. Insurance companies adjust rates based on external factors associated with each area, such as the number of drivers, the frequency of crimes like vandalism or theft, and the risk of natural disasters like floods or wildfires.

Your age

Age is one of the most significant factors in determining auto insurance premiums. While there are good drivers in every age group, younger drivers are generally more likely to have accidents or take risks on the road. Teen drivers are considered very risky and potentially expensive clients, as they are less experienced and more likely to get into accidents. Data shows that teen drivers drive more recklessly and get into more accidents than any other age group. As a result, insurers charge more for teen drivers to offset the higher costs associated with their claims.

The cost of auto insurance is highest for teens and young adults, with rates decreasing as drivers gain more experience. By age 25, drivers typically see a significant reduction in their premiums, and rates continue to decrease until the driver's mid-50s. At this point, auto insurance premiums reach their lowest point before beginning to rise again for older drivers aged 70 and above. Aging-related factors such as vision or hearing loss and slowed response time contribute to this increase.

It is important to note that age is not the only factor influencing auto insurance premiums. Other factors, such as driving record, credit score, and location, also play a role in determining the cost of auto insurance. Additionally, not all states permit age as a rating factor, with Hawaii and Massachusetts banning its use. Despite this, age is still a critical aspect of auto insurance premiums, with younger and older drivers typically paying higher rates.

Your credit history

• Outstanding debt: The amount of debt you currently owe.
• Credit history length: How long you've had open lines of credit.
• Credit mix: The types of credit you have, such as credit cards, auto loans, or mortgages.
• Payment history: Your track record of paying off debts on time.
• Pursuit of new credit: Recent attempts to open new lines of credit.

Insurers use these scores to predict the likelihood of you filing a claim. Individuals with better credit history are often seen as less likely to file claims, and insurers reward them with lower rates. Conversely, those with poorer credit history may be considered higher-risk and charged higher premiums.

The impact of credit history on insurance premiums varies across states due to factors like local traffic conditions, weather patterns, population density, and cost of living. Notably, California, Hawaii, Massachusetts, and Michigan have regulations prohibiting or limiting the use of credit scores in setting insurance premiums.

Improving your credit score can help you secure lower insurance rates. Some ways to enhance your credit score include paying your bills on time, minimizing hard credit inquiries, regularly monitoring your score, maintaining old lines of credit, and keeping your credit utilization ratio below 30%.

Your driving record

Minor moving violations, such as speeding tickets or fender benders, will typically increase your insurance premiums by 10 to 15%. More serious offenses, such as DUI or reckless driving, can label you as a high-risk driver and push your premiums up by 30% to 300%. Even a single speeding ticket can bump your rates by 20%.

Insurance companies evaluate your driving record when determining your rates and may take into account any driver's license points you have accumulated if your state uses a point system. They typically look back at your record from the last three years, so it will take some time for violations to disappear.

• Credit rating: Failing to pay a traffic or red-light ticket can damage your credit rating. If left unpaid, it will eventually be turned over to a collection agency, and your credit score could drop significantly.
• Arrest warrant: An unpaid traffic violation can result in an arrest warrant and a suspended license, making it illegal to drive. Driving with a suspended license can lead to criminal charges.
• Right to vote: A DUI or reckless driving charge can be classified as a felony if it results in serious damage or a fatality. Convicted felons may lose their right to vote, hold public office, receive federal aid for education, or travel to certain foreign countries.
• Life insurance: A risky driving record can make you appear more likely to be in a fatal accident, increasing your life insurance rates.
• Employment: A serious driving infraction or a string of small ones may cost you your job, especially if driving is a significant part of your work. Even if you keep your license, the insurance increase may be too much for your employer. A DUI or other serious conviction can also affect your future employment prospects, as many companies run background checks on potential employees.
• Career choices: A felony DUI conviction can prevent you from becoming a police officer or a pilot.
• Adopting a baby: While not a deal-breaker, a DUI or serious driving infraction on your record may decrease your chances of being approved by an adoption agency.

Frequently asked questions