- Car insurance costs vary greatly depending on your age, gender, location, driving history and more.
- Insurers’ premiums vary, so you’ll want to shop around.
- There are three types of car insurance—liability, collision and comprehensive.
- Expect to pay more if you’re a new driver, as you won’t have a driving record yet for insurers to gauge the risk of taking you on.
So you got yourself a set of wheels. Congratulations! You may think that after the down payment or having paid for the car outright the costs are largely behind you. But there are many costs associated with car ownership.
It’s a good idea to factor these costs—from registration fees to gassing it up to regular maintenance—into your budget. And of course, there’s also your monthly auto insurance premium.
The actual cost of car insurance varies from driver to driver as well as varying based on many other factors. We asked Katie Sopko, an insurance broker at A Plus Insurance in Colorado Springs, Colorado, to break down for us the six major factors that help determine your car insurance premiums. Here’s what to know about the different types of car insurance and how much it can cost you.
What are the different types of auto insurance?
When it comes to car insurance, there are three types: liability, collision and comprehensive. To get a handle on the cost of your premium, you need to understand what each is about:
Auto liability insurance is the type that most states require drivers to have by law. It’s designed to kick in if you are responsible for an accident and need to pay for the other party’s medical expenses and vehicle repair. It can also cover repairs to your own vehicle if you’re in a collision with an uninsured (or underinsured) driver.
There are three types of coverage within this category:
Bodily injury liability
Property damage liability
Uninsured (or underinsured) motorists coverage
The amount of liability insurance you are required to carry will vary depending on the laws of the state your car is registered in. Your state will specify a minimum amount of coverage. But, if your budget allows, you can buy more than the minimum to help ensure you have enough coverage. Liability is usually the highest-costing portion of insurance coverage because of the type of protection it offers.
Collision insurance helps pay for repairs to your vehicle if it hits another car or object. That could mean a crash with another vehicle, swerving to avoid an animal in the road and hitting a tree or other obstruction, or any incident that causes your car to roll over. So if you get into an accident and you’re at fault, collision coverage pays for the repairs to your own car.
Without collision insurance, you may be required to pay for repairs out of pocket, and depending on the extent of the damage that could be a significant amount.
It’s also important to note that collision coverage requires a deductible, which can run from $500 to $1,000. The deductible is due per incident, so the amount you choose will need to be paid out each time a collision claim is placed. But the higher the deductible, the lower your monthly payments.
Comprehensive insurance covers things that aren’t considered collisions and could happen to your car when it’s parked. These include theft, vandalism, fire, weather or tree damage and damage from the impact of an animal or natural disaster like an earthquake or hurricane.
Many drivers purchase collision and comprehensive insurance together as a package. In fact, many lenders may require you to carry this insurance if you finance your car.
Comprehensive insurance also charges a deductible that needs to be paid out of pocket each time you put in a claim and usually runs $500 to $1,000.
What’s the average cost of car insurance?
A 2020 study by the American Automobile Association (AAA) on the average cost of car ownership estimates the cost of a full-coverage auto insurance policy as $1,202 per year. This is for someone who is younger than age 65 and has more than six years of driving experience with no accidents and resides in a suburban location. The policy includes discounts for passive restraints and an anti-theft system, so it’s for someone whose car has both features.
What’s the breakdown of how much the three different types of auto insurance cost in a full-coverage policy? The Insurance Information Institute’s own data on annual full-coverage estimates that the average annual cost of collision insurance is $290, and comprehensive insurance is $134. These are typically packaged with a liability policy, which runs about $611, to create a full-coverage auto insurance policy.
What factors affect the cost of car insurance?
According to Katie Sopko, an insurance broker at A Plus Insurance in Colorado Springs, Colorado, there are six major factors that help determine your car insurance premiums:
Age: “Your age is a factor due to your driving experience,” says Sopko. “If you are a younger driver your rates will be higher in comparison to drivers over the age of 25. That’s why insurance premiums are higher for newly licensed drivers and decrease the older you get. With more experience behind the wheel, your chances of getting into a wreck and making a claim decrease.”
Gender: You read that right—your gender affects how much you pay. The Insurance Information Institute reports that women are statistically less likely to be involved in crashes, and the crashes they do get in tend to be less serious than the ones men are involved in. Additionally, women statistically have fewer crashes caused by driving under the influence of alcohol or drugs. All that means women typically get lower insurance rates than men.
Marital status: Many insurance providers will offer a discount if you are married. Data shows that married drivers make fewer claims than single drivers, and therefore are more likely to get lower rates. Bonus if you own a home and bundle your homeowners and auto insurance under one policy.
Zip code: Your location also has an effect on how much you’ll pay for auto insurance. According to the Insurance Information Institute, drivers who live in urban areas are more likely to be victims of theft or vandalism, and therefore pay more for car insurance. Your state can also have a bearing on how much you pay; some states have higher costs for repairs, more frequent litigation and higher instances of insurance fraud. The weather in your location can also be a factor.
Driving record: Drivers who have crashes or serious traffic violations on their record will have higher auto insurance premiums than drivers with a clean record, according to the Insurance Information Institute. Similarly, if you are a new driver and don’t have any driving record, you’ll likely pay more since the insurer can’t tell whether you’re a safe driver or a risky one.
Your vehicle: If you have a top-of-the-line premium car, expect to pay more for insurance. That’s because it’ll cost more for your insurer to cover a repair or replacement if anything happens. On the flip side, if you drive a bare-bones, entry-level sedan, your auto insurance premium will be lower.
Some other factors listed by the National Association of Insurance Commissioners (NAIC) include your claims history, credit history, previous insurance coverage, vehicle use, number of miles driven, and coverages and deductibles.
What can reduce car insurance premiums?
Most insurers offer a variety of discounts that you may be eligible for that can reduce your insurance premium. Discounts are typically found in the following categories:
Here are the details on some of these discounts:
If you’re willing to take a defensive driver course, you may be able to get a discount on your premium.
If you stay accident-free for a certain period of time (determined by the insurance company), there could be some cost savings there, too.
Many insurers will offer discounts based on occupation or status (such as law enforcement or military) or if you get good grades and you’re a student.
You can also ask whether you can get a lower rate by bundling your auto insurance policy with your homeowners or renters insurance.
Finally, if your vehicle has safety features like daytime running lights or newer technologies, you might also qualify for a discount.
The best way to find out about discounts on your premium is to call your insurer to see what you might be eligible for.