Auto Insurance

+ What Does Average Car Insurance Cost?

There’s no reasonable answer to that question. Perhaps a better question would be, “What determines how much my auto insurance is likely to cost?” You can’t compare car insurance in any sort of meaningful way until you understand the many factors shaping the results. Some of them are based on your past choices and experiences, while others are completely out of your control.

+ How Your Age Impacts Any Auto Insurance Quote

The insurance game is all about statistics and weighing the odds. Like running a casino, insurance companies want to take in as much as possible while paying out enough to maintain their credibility (and legal obligations) – but not more than necessary. Because competition is fierce, they want to accomplish this while offering the most attractive rates possible.

One of the biggest factors in any auto insurance quote is your age. Teenagers are going to pay more for any level of coverage in any state. Why? Because they have the most accidents. It’s not personal; it’s just the math. Teenagers haven’t driven as long, and some aren’t known for their clearheaded or overly cautious natures. Some companies offer discounts based on the driver’s GPA in school or other factors which may seem unrelated to their driving. The numbers say that students with better grades tend to drive more responsibly and get in fewer accidents. It’s not a judgement of anyone as a person – it’s just statistics.

All other things being equal, rates drop as a driver moves through their 20s. They rise again slightly when drivers reach their 60s. Again, it’s just the math. Older drivers have slightly more accidents.

+ Let’s Talk About Sex (While We Compare Auto Insurance Rates)

Vehicle insurance is one of the remaining areas in which it’s OK to discriminate based on sex (or, if you prefer, “gender.”) Why? Maybe it’s partly because men are likely to pay more for auto insurance than women whose demographics and history are otherwise the same, rather than the reverse. Mostly, though, it’s those pesky statistics again. Men as a whole are more likely to get into accidents, to refuse to wear a seatbelt, to drive sportscars, and to drive aggressively or unsafely. They also simply drive more than women, meaning more chances to have an accident.

If you’re a man and that’s not how you are, you’re welcome to find this unfair. In the meantime, be ready to pay a little bit more for your car or truck insurance.

+ What Are You Driving At?

What you drive comes into play in several ways. Sporty red convertibles tend to get into more accidents and be stolen more often than sensible mid-range minivans. The accident rate isn’t due to defects in design; it’s a statistical correlation between people who want sporty red convertibles and people who tend to drive less cautiously. (Smokers are more likely to have accidents than non-smokers, even if they never smoke while driving. It’s a personality thing.) The theft rate is higher because people who steal cars are more likely to want a sporty red convertible than a mom car. So, an auto quote for insurance on your midlife crisis-mobile will usually be a bit higher.

Some cars cost more to fix because the parts are harder to get or the design requires dealer-certified mechanics. Other cars are more likely to be stolen than their less-desirable alternatives. If you love your car and it makes all your friends jealous, your insurance will probably cost more as a result. If you park several blocks away from wherever you’re going and walk a few extra blocks so no one knows that one’s yours, congratulations – you’re probably going to get a great deal on your coverage!

The other, more obvious, factor is the cost of repairing or replacing the vehicle. If you want cheap full coverage car insurance, start by driving a cheaper car. They are, by definition, cheaper to replace. Used vehicles cost less to insure than new. High end vehicles cost more to insure than economy cars. No real surprises here.

+ Getting You Where (And How) You Live

Auto owner insurance is also rated based on where you live – right down to your ZIP code. Higher population density? Higher rates. Lower crime? Lower rates. Bad weather? Higher rates. Less traveled roads? Lower rates. A few states restrict insurer’s ability to adjust rates within the state. Whether this helps or hurts you individually depends on – no shock here – where you live.

Some states have much higher or lower averages than the national mean. In 2020, if you drive in Maine, North Carolina, or Virginia, you’ll probably pay less than half of what you’d pay for the same coverage in Michigan, Florida, or Louisiana. Some of this is simply a combination of the other factors we’ve covered. The rest comes down to – you guessed it – statistics.

It also matters whether you own your home, rent a house, or live in an apartment. Renters can pay substantially more than homeowners, again based solely on statistics. Whether it’s because of the relative safety of garages, or because homeowners tend to have families and thus live more conservatively and safely, doesn’t really matter.

Similarly, married individuals tend to get slightly lower rates than if they were single. They even get better rates than those who are divorced or widowed. Insurers aren’t judging your life choices – just following the math. It’s the same with your credit score. What does your outstanding credit card debt or those times you were late on the electric bill have to do with your driving? Nothing, directly – but the lowest rates for car insurance go to whoever the algorithms say are least likely to file claims. Higher credit scores correlate with fewer accidents or other claims, so that means lower rates. Period.

+ Your Driving History

No surprise here – your driving record matters. The more accidents, DUIs, or tickets you’ve accumulated over the years, the higher your rates are likely to be. While we can’t entirely control this one, we have some major input. You don’t have to drive after you’ve been drinking. You’re not required to exceed the speed limit. You can dramatically improve your odds by simply making reasonable adult decisions.

Some companies even offer those fancy little tracking devices to measure how fast you usually go and gage other habits related to driving safety. If you keep the device happy, your rates go down a bit. It’s a brilliant gimmick, and once again all about the statistics. People who know they’re being “monitored,” even by a little device, tend to make better decisions. We’re funny like that.

+ Who Do You Use For Auto Insurance?

Finally, something over which we have almost complete control.

While average rates are going to be higher or lower based on your age, your sex, your ZIP code, your driving record, even your credit score, that doesn’t mean they’ll be the same from insurer to insurer. All insurance providers follow the statistics, but so do all stock market investors – and their strategies vary widely. Everyone who bets on professional sports or horse racing has access to the same numbers, but they read them differently and apply them differently based on their own models of what’s most likely to bring them long-term success.

All insurance providers want to balance offering reliable coverage with making a reasonable profit, but that doesn’t mean they all offer the same coverage at the same price, even to the same person. It’s essential that you compare auto insurance rates before making a decision. And make sure it’s “apples to apples” – you won’t learn much by comparing Company A’s comprehensive and collision insurance with Company B’s minimum liability coverage.

It’s also a good idea to compare auto insurance companies. What’s their track record for paying out valid claims? Do they have testimonials from hundreds of satisfied customers, or is the only reference to them you can find online something about a class action lawsuit for shady business practices? Sometimes it’s reassuring to use the big name insurance companies. It seems like they must be pretty solid or you wouldn’t hear their names and see their offices everywhere. Perhaps, but that’s not always a given. That sketchy place next to the Quickie Mart might be a diamond in the rough, or it might just be two brothers in bad suits making claims they can’t back up. How can you know for sure?

It’s increasingly popular to buy car insurance online. Without the overhead of local office buildings or the limitations of serving only clients within a handful of ZIP codes, the average car insurance cost of online polices can be quite competitive and the service and response times impressive. That’s what happens with modern American capitalism works the way it’s supposed to – customers are given more options and better products thanks to ongoing competition between companies for their business.