How Much Does Car Insurance Cost?

"How much will it cost to insure my new ride?" is one of the most frequently asked questions TrustedInsurance receives from new and used car buyers. Unfortunately, there is no one-size-fits-all answer to this question.

Looking at Average Costs for Guidance

Some consumer advocates recommend looking at averages for guidance. According to the National Association of Insurance Commissioners' 2016/2017 Auto Insurance Database Report, published this January, the average cost of a "complete" insurance policy (which provides liability, comprehensive, and collision coverage—more on all of those in a moment) in 2017 ranged from $765 in Maine to $1,638 in Louisiana. The national median price was $1,134.

These figures provide an estimate of how much you will pay for an insurance policy. They are, however, averages—averages of averages. That is, they are no better than educated guesses. Costs differ from one state to the next, county to county, and insurance provider to insurance provider. As a result, you must make an informed decision when selecting a provider.

Only the insurance company you choose—whether Allstate, Progressive, USAA, Farmer's, GEICO, or another—can provide an accurate answer to the "how much?" question. And each will have its own set of risk-adjustment factors and formulas for calculating your annual premium.

However, regardless of the carrier, there are a few standard factors that you can expect to be taken into account when determining how much you will pay. We've divided them into three categories: you, your car, and the types of coverage you want. Here's how they each influence the price equation.

Standard Factor #1: You

Companies consider five different "components," all of which focus on your risk, when deciding whether to provide you with vehicle insurance.

Your driving record

According to Michael Barry, senior vice president of the Insurance Information Institute, insurance companies typically consider your driving history over the last few years when determining your rates. "The insurer is looking at the likelihood that you'll file a claim, and someone with a significant number of moving violations or more serious incidents such as driving under the influence will impact the cost of insurance," he explains. That is, if you have a clean driving record, you are not a risk. If you're just one moving violation away from having your license revoked, you're a high risk, and your premium will reflect that.

Your age

According to statistics, older, more experienced drivers are safer than younger drivers. According to the Insurance Institute for Highway Safety, young, inexperienced drivers are more likely to be involved in a crash than experienced drivers. "Eighteen- to 25-year-olds are more likely than almost any other age group to file claims," says Barry. As a result, they have to pay more for insurance.

Adults aged 60 to 64 have the lowest claim rate and pay the lowest insurance premiums compared to most younger adults. According to the Insurance Information Institute, senior drivers may be more cautious or avoid driving altogether due to "physical changes associated with age that affect eyesight, hearing, and cognitive ability."

Your gender

Women, on average, drive less than men, though this is changing. As a result, they receive fewer moving violations, are charged less frequently with driving under the influence (DUI), and have fewer fatal collisions than men. As a result, men pay higher insurance premiums because they are at a higher risk.

Your credit score

Insurance and credit scores are not the same thing, but they are related. Both are calculated using information from a credit report, such as outstanding debt, bankruptcies, length of credit history, collections, new credit applications, number of credit accounts in use, and debt repayment timeliness. As a result, your credit score is regarded as a measure of responsibility. It is used by insurance companies to determine how you will treat your vehicle and the likelihood that you will file a claim. It's known as an "insurance score."

Standard Factor #2: Your Car

Your car's year, make, and model

Insurance companies look at how much it costs to repair a car rather than how much it costs to buy it. Consider a collision between a Lamborghini and a Kia. The Lambo will require costly, hand-built parts from Italy to be repaired. Almost every aftermarket parts store sells Kia replacement parts online. As a result, the owner of the raging bull will pay more for insurance because the sports car is more expensive to repair.

Where your car 'lives'

Why do insurers consider location? "If you live in a densely populated area, your chances of getting into an accident increase," says Barry, and so does your risk assessment. "That's why rates are so high in places like New York and New Jersey." Vandalism and auto theft are also more common in densely populated areas.

Natural disaster-prone areas have higher risk assessments. "Hurricane season is approaching," Barry warns. "Florida, Louisiana, and Texas come to mind right away. Claims for flooded cars and those hit by falling tree limbs will be filed, resulting in a massive number of auto insurance claims." As a result, rates in those states will be higher than in areas with fewer natural disasters.

Standard Factor #3: The Type of Coverage You Want

Your policy's five primary types of coverage—liability, collision, comprehensive, personal injury protection, and uninsured motorist—will also help determine the cost of your monthly premium. So it's a good idea to understand what these are and how they work.

The "minimum required coverage" in each state is typically the least expensive insurance policy available.The only requirement is liability. It is required in most states and protects you from financial liability if you injure someone or damage their property in a car accident.

Collision coverage, which reimburses the insured for damage to their personal automobile caused by the insured's fault, and comprehensive coverage, which covers damage to your car caused by causes other than a collision, aren't typically required by law, but they are popular options anyway. They are a component of what is commonly referred to as full or complete coverage. They protect you if your car is damaged in a car accident or in some other way (think falling trees, and guardrails, for example). Skipping comprehensive and collision coverage may lower your monthly premiums, but it may result in higher costs later if you are forced to pay for major repairs.

Others are less well-known, but no less important.

• Personal injury protection pays all medical bills for the driver and passengers if you're in an accident.
• Uninsured motorist insurance pays when the other party in a collision does not have insurance, or has insufficient coverage to cover the cost of the resulting medical or repair bills.

The Bottom Line

To determine the cost of your auto insurance, insurance companies consider the components of these three standard factors and apply them to their formulas. Every insurer is unique, which is why it pays to shop around and obtain quotes from various companies. And don't forget to inquire about discounts, such as those available if you're over the age of 55, which can reduce the cost of your annual premium.