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How much are you paying for auto insurance? If you are like many Americans, you could be overpaying, especially if you haven’t shopped around for a new policy in several years. Many insurance companies offer low rates for new customers to drive them away from the competition.
Americans spend a combined total of $271 billion in auto insurance annually, according to a recent study from online bill pay service doxo. Each U.S. household spends roughly $209 per month on auto insurance.
This figure echoes research from Bankrate, which revealed that the average annual premium for full coverage car insurance in 2024 is $2,543, roughly $212 per month. That’s an increase of 26%, according to the personal finance website.
Of course, you don’t have to struggle with such a tremendous price increase. You can keep costs down with savvy shopping strategies. Let’s unravel the facts behind auto insurance and find ways to secure the best rates.
Auto insurance protects not just a vehicle’s driver and its passengers but also other drivers, passengers, and even pedestrians from financial loss in case of an accident. It’s not fun paying that $200+ bill each month, but carrying the right level of auto insurance provides peace of mind when you’re on the road.
Car insurance of some type is required in all states except New Hampshire, according to the Progressive Insurance website. However, New Hampshire drivers must show they have funds of $100,000 available to cover the cost of an accident. That money must be deposited with the state treasurer.
Likewise, you may waive the auto insurance requirement in Virginia by paying an annual $500 uninsured motorist fee. In Florida, you only need to purchase personal injury protection (PIP) and liability coverage for property.
However, it’s wise to invest in car insurance to cover any contingency. If your vehicle is damaged in an accident, collision insurance can cover that damage or help pay for a new car if your car is totaled. Carrying liability insurance helps prevent you from a lawsuit or paying out of pocket if someone is insured in a car accident where you were found to be at fault.
In addition to putting yourself at financial risk in case of an accident, you might face other penalties for driving without insurance. Even if you are lucky enough to avoid an accident, penalties can include:
Not every driver needs to carry every type of insurance. For instance, if you drive an older vehicle that’s fully paid for, it might be worthwhile to skip collision coverage, which covers damage to your vehicle during an accident that’s your fault.
Here are some types of coverage to consider:
Liability: Liability coverage is mandated in most states to cover bodily injury or property damage to the other people or vehicles involved in an accident if you were at fault.
Collision: Collision covers any damage to your car in an accident. If you have a car loan or lease, collision coverage is typically required by the finance company.
Comprehensive: Like collision, comprehensive insurance covers damage to your vehicle from weather, fire, or vandalism. It also covers theft and may cover glass, too.
Personal Injury Protection / Medical Payments: Some policies cover medical payments and other expenses related to an accident
Understanding the key factors that affect your insurance rates can help you save money.
Your driving record is one of the keys impacting your auto insurance rates. A history of accidents, tickets, or points on your license can lead to higher premiums. You may be able to remove points from your license by taking a defensive driving course online.
On the other hand, a safe driving record can lower your premiums. Agreeing to install a telematics device that tracks your speed and driving habits can also lead to lower rates; but that strategy could backfire if your insurance company detects unsafe driving habits, such as frequent sudden braking or speeding.
Typically, younger drivers under 25 pay more for insurance. Rates typically drop for drivers over the age of 25, and more so if they are married and own a house.
If you’re a teen driver or have one in your household, don’t despair. You may be able to secure discounts for good grades at school. College students may snag significant savings if they only use their car during the summer when they’re home from school.
The type of car you drive dramatically affects car insurance rates. Before buying a new vehicle, you may want to get insurance estimates so you can calculate the true cost of ownership. Newer cars cost more, and typically require comprehensive coverage, so they cost more to insure.
Where you live affects insurance premiums; some states have higher coverage limits, leading to higher premium prices for liability coverage. Drivers in densely populated areas will pay more for insurance, since the likelihood of an accident rises. Crime rates in different neighborhoods can affect comprehensive coverage premiums, too.
It may not seem fair, but many insurance companies view your credit score as a measure of your personal responsibility. One study from TheZebra.com found that drivers with a credit score lower than 580 pay 109% more than drivers with a score above 800, regardless of their driving record. By boosting your credit score just one tier (from poor to fair, for instance) you can save 17% on your premiums, TheZebra.com reported.
While many factors that affect your insurance rates are beyond your control, you can still take steps to lower your premiums.
Many people only shop around for car insurance when they purchase a new car. But you can save money by shopping your policy yearly. The 2024 State of the American Driver Report by Jerry revealed that 60% of drivers who shopped around saved money on their auto insurance.
Use a website or an app that collects quotes from a variety of companies to find the lowest rates. Before you begin, gather all the necessary information, including your vehicle’s VIN, make and model, your driver’s license number, car mileage, and your address.
Drivers can save money by bundling auto and home insurance, taking a defensive driving course, or agreeing to share telematics data with the insurance company. Also ask about safe driver discounts, discounts for drivers who don’t use the car very often, and discounts for high school and college students who get good grades.
You can often reduce your insurance premiums by increasing your deductible. However, make sure you can cover the deductible in case of an accident.
Of course, you don’t want to pay more than you have to for car insurance. But you also don’t want to be stuck with a company that doesn’t follow through on customer service, leaves you on hold when you call or is otherwise hard to reach, or fails to pay claims.
When you research insurance companies, don’t just look at pricing. Consider the following factors:
Read online reviews to find out if drivers like you have any complaints about pricing, service, or the claims process.
Finally, make sure the insurance company is financially secure. Financial ratings only reflect a company’s financial stability – not its customer service, pricing or claims process. But checking ratings is a crucial step to ensure your insurance company will be there when you need it. Besides being a legal necessity, auto insurance provides peace of mind that your losses will be covered in an accident.
You can check financial ratings through:
J.D. Power & Associates provides ratings based on customer service.
Before you switch insurers, gather as much information as you can to help you make the right choice.
