Guide to car insurance

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Bankrate’s insurance experts guide you through the basics of car insurance. Our exclusive approach can help you feel more confident in your insurance decisions.

Key takeaways
  • Car insurance is a financial product designed to protect your finances from the fallout of accidents and injuries.
  • Auto insurance policies consist of numerous different coverage types.
  • Comparing car insurance quotes from different companies can help you find the policy that is right for your needs.
  • Many factors affect your car insurance rates, including your age and gender (in most states), the type of vehicle you drive, your driving history and the specific coverage you buy.

What is car insurance?

Understanding the basics of car insurance can help to empower you to choose a car insurance company that is right for your needs. Car insurance is part of a larger type of insurance called property and casualty, which also includes home insurance, boat insurance and renters insurance, among other types. Insurance is a financial product. Car insurance does not actually protect your car; it protects your finances. Depending on the coverage you purchase, an auto insurance policy is designed to protect you from the financial devastation that could result from being in a car accident.

You might choose to purchase liability-only coverage, which protects your finances from the fallout of causing damage to someone else’s vehicle or property or injuring someone, or you could choose full coverage, which adds financial protection for damage to your car. Insurance is also a pool. Everyone pitches in a little money — your premium amount — so that if and when an accident happens, everyone loses a little bit, but no one loses everything.

Types of car insurance coverage

An auto insurance policy is a package of several coverage types. The kinds and amounts of coverage you choose will depend on your specific situation. If you make a car insurance comparison, make sure the same coverage types and limits are included on each quote, so each company is on a level playing field. Some common coverage types are:

  • Bodily injury liability: This is designed to cover the cost of injuries that you cause to another party in an accident.
  • Property damage liability:This pays for the damage that you cause to someone else’s property in an at-fault accident, like damage to another car, a building or personal property.
  • Uninsured motorist and underinsured motorist coverage: These coverages can pay for your damages and injuries if you are hit by a motorist who does not have any insurance or does not have enough insurance to cover your expenses.
  • Collision: This covers the damages to your car caused by colliding with another vehicle or object.
  • Comprehensive: Often called “other-than-collision” coverage, this pays for damages to your car caused by a variety of scenarios, including theft, vandalism, storm damage, weather damage and hitting an animal. Adding comprehensive and collision to your policy means you are purchasing “full coverage.”
  • Medical payments coverage: This pays for your and your passengers’ medical bills stemming from an accident, regardless of fault. Depending on where you live, it maybe mandatory, optional or not available.
  • Personal injury protection (PIP): This coverage is similar to medical payments, but also covers lost wages and the cost to hire someone to do household tasks if you or a passenger is unable to complete them. It is often required in no-fault states, may be optional, or, like medical payments, may not be available depending on where you live.
  • Gap insurance: If you have a loan or lease on your vehicle, this coverage pays the difference between your loan amount and the depreciated value of your car if it is totaled.

When comparing car insurance quotes, you will likely want to make sure you have requested the same types and amounts of coverage from each company. That way, you can more easily see which company can offer a lower premium for the coverage you need.

How much car insurance do I need?

How much car insurance you need will depend on your individual needs. You’ll have to purchase at least the required minimum coverage types and limits in your state to drive legally. However, most car insurance experts recommend that you purchase higher liability limits, even if you opt for a liability-only policy. State minimum limits are often very low and could leave you with high out-of-pocket expenses if you cause an accident and the damages exceed your insurance limit.

If you have a loan or lease on your car, your financial institution will likely require you to have a full coverage policy. Even if you own your car outright, you might want to consider purchasing full coverage, especially if your vehicle is newer, relatively expensive or you do not have the funds to repair or replace it yourself after an accident.

How to compare car insurance rates

If you are shopping for auto insurance, you have probably heard that you should compare car insurance quotes. Average rates vary between different insurance companies, so shopping around can help you find a policy that fits your needs, even if you are looking for the cheapest car insurance possible. But what are you looking for? How should you compare auto insurance quotes? How do you know if you are getting a good deal?

Factors that affect car insurance rates

Your car insurance premium is not just based on which company you choose. There are numerous other factors that can impact how much you pay for auto insurance, including:

  • Age: Your age has a large impact on your car insurance premium, with teens paying the most. This is why it can be beneficial for parents to insure teenagers, rather than having your teen get their own policy. As you age into your 20s and 30s, car insurance rates begin to drop. However, rates may slightly increase again after around 70-years-old.
  • Gender: Males tend to pay higher rates than females, due to an increased likelihood of getting into more accidents and more severe accidents. California, Hawaii, Massachusetts, Michigan, Montana, North Carolina and Pennsylvania do not allow insurance companies to use gender as a factor to calculate your premium.
  • Vehicle type: The vehicle you drive is another big factor when it comes to how much you will pay. Some vehicles are cheaper to insure than others.
  • Credit rating: It may be surprising, but your credit score can impact your car insurance premium. Drivers with low credit scores tend to find more claims than drivers with higher scores, and so insurance companies charge higher premiums to compensate for the increased risk. Not all states allow credit to be used as a factor in determining your rate.
  • Driving record: If you have accidents, tickets or DUI convictions on your record, you will likely pay more for insurance.
  • Insurance history: Drivers with continuous insurance tend to pay less than drivers with lapses in coverage or no insurance history.
  • Coverages: The coverage and levels of coverage that you choose will raise or lower your premium. Generally, higher levels and more optional coverages will cost more.
  • Discounts: If you qualify for one or more car insurance discounts, you may be able to lower your premium.

You may also save money on car insurance if you are
married. And if you are a member of the military or a veteran, you could find specialized discounts or coverage options that are less expensive.

Car insurance rates by company

Perhaps the first thing you should do when shopping for car insurance is deciding what companies to request quotes from. Different companies have different ways of rating policies, so prices will vary even for the same coverage. First, you may want to think about what factors matter most to you. Are you looking for the lowest price possible or certain policy features like a mobile app or high customer satisfaction scores? By deciding what you want from an insurance company, you may be able to narrow down which companies to approach for quotes.


*Overall standing affected by limited data availability

Car insurance rates by state

In addition to the factors listed above, the state you live in has one of the biggest impacts on your car insurance premium. Your state’s minimum coverage laws, the likelihood of getting into an accident, the average severity of accidents and the percentage of uninsured motorists can all impact the average car insurance cost in your state.

Car insurance rates by age

In most states, your age plays a significant role in how much your car insurance costs. Younger drivers tend to be viewed as higher risk by insurance companies, with a greater likelihood of causing accidents, than older drivers. If you can manage to keep a clean driving record, your car insurance premiums will generally decrease in your early 20s, although they can begin to creep up again in your senior years.

Age Avg. annual full coverage premium for males Avg. annual full coverage premium for females
16-year-old* $2,783 $2,280
17-year-old* $2,485 $2,015
18-year-old $5,727 $4,983
19-year-old $4,434 $3,831
20-year-old $4,097 $3,491
21-year-old $3,149 $2,787
22-year-old $2,828 $2,495
23-year-old $2,675 $2,394
24-year-old $2,535 $2,282
25-year-old $2,181 $2,036
30-year-old $1,869 $1,832
35-year-old $1,813 $1,790
40-year-old $1,648 $1,701
50-year-old $1,463 $1,439
60-year-old $1,421 $1,389
70-year-old $1,564 $1,505

*16- and 17-year-old premium reflects the policy increase when the teen is added to a parent’s policy.

Frequently asked questions

Methodology

Bankrate utilizes Quadrant Information Services to analyze 2021 rates for all ZIP codes and carriers in all 50 states and Washington, D.C. Quoted rates are based on a 40-year-old male and female driver with a clean driving record, good credit and the following full coverage limits:

  • $100,000 bodily injury liability per person
  • $300,000 bodily injury liability per accident
  • $50,000 property damage liability per accident
  • $100,000 uninsured motorist bodily injury per person
  • $300,000 uninsured motorist bodily injury per accident
  • $500 collision deductible
  • $500 comprehensive deductible

To determine minimum coverage limits, Bankrate used minimum coverage that meets each state’s requirements. Our base profile drivers own a 2019 Toyota Camry, commute five days a week and drive 12,000 miles annually. These are sample rates and should only be used for comparative purposes.
Incident: Rates were calculated by evaluating our base profile with the following incidents applied: clean record (base), at-fault accident, single speeding ticket, single DUI conviction and lapse in coverage.

Age: Rates were calculated by evaluating our base profile with the ages 18-60 (base: 40 years) applied. Depending on age, drivers may be a renter or homeowner.

Written by
Cate Deventer
Insurance Writer & Editor
Cate Deventer is a writer, editor and insurance professional with over a decade of experience in the insurance industry as a licensed insurance agent.
Edited by
Insurance Editor