How Much is Car Insurance

At the state level, state laws play a significant factor in how insurance is regulated. Ultimately, the required state minimum car insurance coverage creates a base from which insurance providers can begin to calculate risk.

To illustrate, the minimum coverages in California and Texas are wildly different. The minimums in California are 15/30/5, and Texas is 30/60/25. For the state minimums, both have similar average annual premiums, $655 and $670, respectively, which means you’re paying more per point of coverage in California than in Texas. This could be for many reasons. Maybe in California, cars are more expensive on average, or people file more claims.

But insurance companies don’t stop there. They also use a set of factors about your zip code, such as population density, crime rate, housing values, traffic statistics, and others, to calculate your premium. We won’t dive into those differences here, but rest assured that you should shop for new car insurance quotes if you move to a new zip code.

Age is another factor that plays a significant role in calculating your car insurance premiums. Overall, there is a fairly predictable pattern in how age influences rates.

In your teens, premiums are significantly high because they are based on how young drivers cope with their learning on the road. Around age 25, car insurance premiums will drop for drivers, often by more than half. This is an age that insurers deem driver’s more mature and become more responsible. However, this is not a guaranteed discount. Instead, it is a statistical fact that insurance companies have observed. If your insurance hasn’t dropped after your 25^th birthday, shop around.

After the age of 25, premiums will slowly and steadily reduce so long as you maintain a clean driving record. At the age of 65, premiums tend to increase, accounting for the new risks posed by aging drivers. Every ten years following, drivers will see sizable increases in their premiums.

Gender plays a factor in premiums calculations. Younger male drivers tend to take more risks and subsequently pay slightly more than their female counterparts. This trend tends to stay true most of the time throughout life.

Some places disagree that gender should be a factor. Gender-based pricing is banned by law in seven states: California, Hawaii, Massachusetts, Michigan, Montana, North Carolina, and Pennsylvania.

Two factors that insurance companies sometimes connect with gender are marriage and homeownership. A young married homeowner may pay less than a young unmarried renter because they are considered more stable and risk-averse.

After Your First At-fault Accident

On average, you will wind up paying 50% more in premiums after your first at-fault accident. Most states will increase your premiums within the range of 30%-60%, with some notable exceptions, like California, which has insurance providers that increase rates as much as 70%.

After a DUI

Drinking and driving is illegal in all states. Aside from the average increase of 87% to your insurance after a DUI, further consequences are strict; you will pay penalties and fees and possibly serve jail time or have your license suspended.

Insurance companies also worry about the type of car you drive. Luxury cars are more expensive to repair, while common vehicles are often stolen for their parts. Other types of performance cars, like sports cars, tend to attract more speeding tickets and have an increased likelihood of accidents. Other vehicles with airbags may have received high safety ratings, which can factor into lower premiums.

The table below lists average premiums for some popular automobiles. Although premiums increase incrementally, the Subaru Outback compared to the Nissan Altima shows a difference of almost $390 in annual premiums for the two different but very similar vehicles.

In some states, insurance providers also use your credit score as a factor for your premiums. These states prohibit using your credit score in determining your insurance rates: California, Hawaii, Massachusetts, Michigan, and New Jersey. Insurance providers can use your credit score in some other states, but either it cannot be the only factor, or they cannot refuse or cancel your policy based on your credit: Maryland, Oregon, and Utah. On average, car insurance rates for drivers with poor credit are more than 75% higher than those with good credit.