How Much Is Car Insurance Supposed to Cost?

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Shopping for car insurance can be quite confusing, especially with the large range of rates out there. There are many different types of coverage integrated into a car insurance policy, and your premium may be higher or lower depending on the level of coverage you choose. For example, there are several types of liability insurance, including:

  • Liability Coverage: Covers expenses of the people you hit when you’re at fault in an accident
  • Bodily Injury Liability: Pays for the medical expenses of people injured in an accident when you’re at fault
  • Property Damage Liability: Pays for any damage caused to the other vehicle when you cause an accident
  • Personal Injury Protection: Covers anyone in your vehicle who needs medical attention after an accident
  • Underinsured/Uninsured Motorist Coverage: Pays for your costs if someone without any or without adequate coverage causes an accident
  • Collision: Pays for your car repairs after a car accident
  • Comprehensive: Pays for costs if your car is damaged in a non-accident situation or is stolen

How to Save on Car Insurance

If you need to keep your insurance premiums within a tight budget, you have a few ways to trim the price. Adjust your coverage amounts and maintain a positive credit history to keep your costs down. Other ways to save include:

  • Compare prices: Don’t settle on the first quote you get; shop around to find the company that gives you a good deal.
  • Bundle other policies: Buying multiple policies, such as homeowners, from the same insurance company may give you loyalty discounts that save money on each of the policies.
  • Choose a higher deductible: Higher deductibles typically mean lower premiums. Be aware that you end up paying more out of pocket if you have an accident.
  • Reduce coverage: If you own your car, you might be able to reduce some of the coverage. For example, if your car is worth less than 10 times the premium, you could drop collision or comprehensive coverage to save money on the monthly payments. If you have a newer car or you have an auto loan, most states and lenders mandate minimum coverage amounts, particularly when it comes to liability insurance

Examples: Steven vs. Sara

To illustrate how your choices in car insurance coverage affect the amount of money you can expect to pay, consider the following scenarios. In each example, assume that the variables — such as the car’s make and model and the owner’s credit score — remain the same.

  • Steven is shopping for insurance for his car. He’s on a tight budget, so he opts for a policy that meets state minimums, with $100,000 per person/$300,000 per accident liability insurance, $15,000 property damage, collision and comprehensive coverage, and a $1,000 deductible. He pays a monthly premium of $50.
  • Sara also needs insurance, but she wants to get maximum coverage. Because her car is worth more than $15,000, she chooses to up her collision and comprehensive coverage to $35,000. She also opts for a lower deductible of $500. Her monthly premium totals $188.

As you can see, the nuts and bolts of an insurance policy can have a significant impact on the final price you pay each month. Although you do have some control over the features you include in your policy, prices also vary depending on your location.

Car Insurance Rates Vary by State

While insurers calculate a large majority of the cost of car insurance based on your credit history and driving history, the state in which you live also plays a big role. Many factors determine the rates in a specific area, including the state’s accident rate, percentage of uninsured drivers, state-mandated coverage levels and weather.

Most Expensive States

In states that rank as having the highest car insurance premiums, personal injury protection coverage, a high percentage of lawsuits and high fatality rates are three primary factors that contribute to soaring costs. In 2016, states with the most expensive car insurance include Michigan, with average annual rates of $2,738; Montana, with average annual rates of $2,297 and New Jersey, which has average annual rates of $1,905.

Least Expensive States

In contrast, states with the lowest premiums often have a high number of insurance companies competing for business and a low percentage of uninsured drivers. In 2016, the states with the most inexpensive car insurance include Maine, with average annual premiums of $808; Ohio, with average annual premiums of $900 and Wisconsin, which has average annual premiums of $812.

For more about how location affects the price of car insurance, review the following table, which provides a snapshot of half a dozen different states:

StateAverage of Three Lowest
Annual Quotes
Range of Annual Quotes
From 10 Large Insurers
Arizona$976$842 to $2,392
California$1,204$970 to $1,783
Florida$1,649$1,155 to $6,010
Illinois$1,096$883 to $2,250
New York$1,958$1,437 to $3,586
Utah$984$695 to $4,458

Bottom Line

With so many different factors contributing to the cost of insurance, there’s no single dollar figure that sets the standard for what your car insurance “should” cost. To make sure you’re getting the most competitive premium, shop around with at least three to four insurance companies, maintain a good credit rating and drive safely.

Caryn Anderson
Caryn Anderson combines extensive behind-the-scenes writing experience with her passion for all things food, fashion and finance. Anderson honed her craft while earning her B.S in Communication Studies from New York University.

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