How to estimate the cost of your car insurance

Car insurance companies assess several factors when determining a driver’s car insurance premiums. As a driver, it’s important to understand that not all drivers will have the same rates. Knowing how your rates are calculated and what car insurance companies look at can help you estimate the amount you may have to pay for car insurance. The national average cost of car insurance in 2023 is $622 for minimum coverage and $2,014 for full coverage per year. However, based on your driving history and the type of coverage you choose, these rates may vary.

What determines your car insurance rate?

Auto insurance rates increased in 2023 due to a combination of inflation, higher probability of claims and lasting impacts of labor shortages seen in the midst of COVID. As insurers see increases in costs, that cost will be passed on to policyholders. When determining how to calculate your car insurance, these are some of the key factors that play a role:

• Your driving record: The more accidents and traffic violations you have on your record, the higher your premium is likely to be. For example, a DUI may nearly double your premiums, and even a simple speeding ticket may mean more than a 20 percent rate increase. Similarly, if you are a newer driver without an established driving record, you will likely pay more than a more experienced driver with a clean driving record.
• How much you use your car: The amount of time you spend on the road can impact your insurance premiums. If you spend a lot of time behind the wheel or drive long distances, you can expect to pay more than someone who drives more infrequently. If you are an infrequent driver, pay-per-mile or usage-based car insurance might help you save money.
• Your location: Car insurance calculation rates vary by state and may even factor in your ZIP code, depending on your state’s insurance laws. The incidence of accidents, vehicle theft, vandalism and the severity of these claims in any given area could cause your insurance to be higher or lower. The area where you park your car — on the street or in a protected garage — can also make a difference in what you pay.
• Your age: Because younger drivers tend to have less experience behind the wheel, they are more likely to get into accidents than mature drivers. If you are under the age of 25, you will likely pay more for car insurance than someone older. Additionally, rates can begin to creep up again after 70. However, Hawaii and Massachusetts prohibit the use of age as a rating factor.
• Your gender: Women are statistically less likely to get into serious traffic accidents than males. As a result, females tend to pay lower car insurance premiums. However, the following states prohibit gender as a rating factor: California, Hawaii, Massachusetts, Michigan, North Carolina and Pennsylvania.
• Your credit score: Your credit may impact your car insurance premium, depending on your state. Drivers with a low credit-based insurance score may be more likely to file claims than drivers with higher scores. Insurance companies often charge more if you have a low credit score to compensate for the increased risk. However, the following states prohibit or limit the use of credit as a rating factor: California, Hawaii, Michigan and Massachusetts.
• The type and amount of coverage you have selected: While you have to purchase at least your state’s minimum levels of coverage to drive legally, you may choose to purchase higher limits or optional coverage types. Generally, increased coverage types and limits will increase your premium.
• The discounts you qualify for: Most car insurance companies offer discounts that might help you save money, like savings when you bundle your home and auto insurance together with the same company or a discount for signing up for paperless statements. Some discounts have more of an effect on your premium than others. Talking to your agent or company about possible discounts might help you maximize savings opportunities.
• Your vehicle make and model: The make and model of the car you choose will also impact your cost of car insurance. The vehicle’s value, repair and parts costs, and theft risk are just a few factors that insurance companies use to determine rates.

It is important to remember that while each factor may play a role in determining how much you will pay for your policy, each insurer weighs each factor differently. Getting quotes from several companies might help you find the coverage you need at a competitive price.

How do coverage types affect your car insurance rate?

Car insurance policies are bundles of several coverage types, and most of those coverage types can be purchased in varying limits. Generally, the more coverage you choose and the higher the limits, the more expensive your car insurance policy will be.

Minimum coverage

Several different coverage types can be included in a policy. Most states require you to carry at least the minimum levels of coverage, but each state has different insurance laws that dictate what coverage types and levels you must purchase. State minimum coverage is often the cheapest car insurance option, but provides less financial protection if you cause an accident. State minimum coverage is often “liability only,” depending on where you live. However, you could choose to purchase liability limits above your state’s minimum limits for a higher premium.

Full coverage

You may also choose to purchase full coverage, which adds comprehensive and collision coverage. These auto insurance coverage types add protection for damage to your vehicle from a myriad of situations, including theft, vandalism, hail and hitting a stationary object or vehicle — whereas minimum coverage insurance does not pay out for damages to your vehicle. If you have a loan or lease, you will likely have to purchase full coverage to protect the lender’s asset. Because you are adding additional coverage, your premium will generally be higher than if you purchased the minimum amount available.

Optional coverage

Finally, some coverage types are generally optional. Optional coverage can help address your individual circumstances. Do you have an unreliable vehicle? You may want to consider roadside assistance. Do you lease or finance your vehicle? You may want to purchase gap insurance, which pays the difference between what you owe on your new vehicle and its current value should it be stolen or totaled in a covered accident.

Uninsured and underinsured motorist coverage may be required by your state, but are usually optional and add coverage for your injuries and possibly the damage to your vehicle if you are hit by someone who does not have any insurance or does not have enough coverage to pay for your damages. Other optional coverage types include car rental coverage, new car replacement or ridesharing coverage. Every company will offer a different range of optional coverage options.

How to figure out your car insurance estimate

One way to know how much your car insurance could cost may be to review the average cost of car insurance in your state. That may give you a general idea of how much a policy costs in your area. From there, getting auto insurance quotes from several companies could help you understand how your rating factors impact your rates.

Now that you understand what factors contribute to your car insurance rates, you may be able to put together an estimate for yourself by considering the following:

• Decide how much insurance you need. Before shopping for coverage, it might be helpful to know how much coverage you need and what optional coverage types you are considering. If you are unsure how to figure this out, talking to an agent might be helpful.
• Think about your individual circumstances. If you have a teen driver to insure, have one or more accidents or tickets on your record, have a DUI conviction or live in an area where car crashes are common, you should probably expect to pay more for insurance than drivers without these factors. Understanding your rating factors might help you search for companies geared toward drivers like you.
• Know what discounts you can take advantage of. If you have a home and auto policy, getting quotes from companies with multi-policy discounts could be a good move. If you have a teen driver, looking for a company with numerous teen driver discounts might help you save.

After taking each of these factors into account, you can begin requesting quotes and comparing insurers. One of the best ways to get an accurate estimate of your car insurance premium is to request a quote. Quotes are not exact, but they may serve as a car insurance estimator to get an idea of how much you’ll pay. A licensed insurance professional can help you finalize rates after you get your quote.

Factors to consider when comparing quotes

When comparing car insurance quotes, it may be more efficient to make apples-to-apples comparisons. Here are some factors to consider if you’re wondering how to estimate the cost of car insurance.

• Coverage limits and types: To get a clear comparison, you’ll likely want to make sure your quotes are for similar coverage types and limits across the different carriers you’re considering. This includes any endorsements you’ve selected. If you are buying coverage for your vehicle, you will likely want to check that your deductibles for comprehensive and collision are the same when comparing the options.
• Discounts: Consider asking about what discount opportunities are available with each insurer and which ones you might qualify for. Keep in mind that even though one company might offer more auto insurance discounts, it’s more impactful to know how the discounts affect the final premium to see which policy is cheaper.
• Customer satisfaction and financial strength ratings: Most of the major insurance companies are rated by agencies like AM Best for financial strength and J.D. Power for customer satisfaction. These scores and ratings may be important for ensuring you are working with a company that will payout claims and prioritize customer experience.
• Policy management features: If you’d like to be able to manage your car insurance online or through a mobile app, this could be another consideration. You may also check a company’s customer service hours, especially if you work odd hours.

Frequently asked questions