The true cost of auto insurance in 2021
Bankrate analyzed car insurance premiums in each U.S. state and metropolitan statistical area to reveal the true cost of auto insurance – the portion of annual income drivers are spending on auto insurance alone. Our findings concluded that Americans spend an average of $1,674 a year, or 2.44% of their income, on full coverage car insurance.
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Explore the true cost of auto insurance in all 50 states and the top 25 metro statistical areas (MSAs). True cost rankings are determined by the average total percentage of income spent on car insurance and not average premiums. The higher the ranking, the higher the true cost of car insurance.
A majority of Americans allocate a portion of their monthly paycheck to car insurance premiums, but what is the true cost of car insurance over time? Understanding your monthly car insurance output could impact other areas of your life. When life happens, like getting a ticket or a credit score decrease, these costs can increase thousands of dollars more.
The national average for full coverage auto insurance is $1,674 per year, but Americans can pay significantly different rates depending on their location. Each state is ranked between one and 50, and each city is ranked between one and 25. The lower the ranking, the less impact your auto insurance premiums have on your annual income, based on average percentages.
Knowing how much other drivers pay for auto insurance in your area can help you understand how your premiums stack up against the average. The factors that determine your premium are ever-changing and may increase or decrease your premium over time. States vary by degree of impact as well. Drivers in California may be surprised to learn that although they pay nearly $400 more than the national average for full coverage insurance, at $2,065 per year, events such as coverage lapses negatively impact their rates the least compared to other states. See how common life events may impact rates in your area above.
True cost rank by state
The percentage difference displayed is between each state’s average premium and the national average annual cost of full coverage car insurance, $1771. True cost rank is based on the average total percentage of income spent on car insurance, not average premiums. The higher the ranking, the higher the true cost of car insurance.
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Average annual full coverage premium
Percent difference from national average
True cost rank by metro
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It is beneficial to understand your full financial picture and how your life events affect your car insurance premium, and then understand where you can earn savings. When searching for auto insurance savings, determining the discounts you are eligible for is important.
Practice good driving habits
Half of the life events that impact car insurance premiums covered in this report directly relate to driving records: speeding tickets, car accidents and DUIs. Each incident can increase your auto insurance premiums significantly.
In some states, rates are more accommodating to drivers with incidents on their driving records. Idaho, Vermont and Hawaii all have average rate increases lower than $200 per year for speeding tickets and $400 per year for car accidents, but this is still a huge impact on your budget. If you live in a state where premium increases for such incidents more closely mirror the national average range of about $350 per year to $730 per year, you might consider seeking out a defensive driver course approved by your insurance company that can offset these increases.
Opting for additional coverages like accident forgiveness at the onset of your policy can also prevent rising rates due to accidents and traffic violations. Even drivers with clean records can find driving-based savings by opting for insurer-specific monitoring programs, which reward safe driving habits with additional discounts.
Choose the right vehicle
The year and model of your vehicle are huge components of your insurance premium. In general, you can expect new and luxury vehicles to be more expensive to insure due to the higher cost of repair.
A mid-range minivan such as Honda Odyssey costs $1,454 per year on average to insure with full coverage compared to a higher-end car, such as a BMW 330i, which costs $2,225 per year on average for the same level of coverage. When shopping for a vehicle, it is best to keep in mind how the vehicle you choose affects your insurance premiums. It may be helpful to get multiple quotes for different vehicles before buying to keep your overall insurance costs low.
Relocate in your metro
Where you live within your city can impact your car insurance premiums. Although moving out of state to reduce your rate is impractical, drivers looking for auto insurance savings could consider moving either to a new city or a different ZIP code within your metro area.
In Florida — where the True Cost Rank of 49 reflects the second-to-highest percentage of income going toward auto insurance — a driver could decide to offset insurance expenses by relocating from Tampa to Orlando, for an average savings of nearly $450 a year on car insurance premiums.
Include your commute costs into savings calculations if possible. If moving to a new metro also reduces how far you drive on a daily basis, many companies offer discounts for putting fewer miles on your car. These discounts could enhance your potential savings.
Improve your credit score
Having a high credit score can save you money unless you live in California, Hawaii or Massachusetts, where credit is not used to determine car insurance rates. Having good credit is especially important in metros like Detroit, Michigan, where low credit scores could result in additional premium costs of more than $5,000 a year, an 186% increase over the national average premium.
If you plan to shop for a new auto insurance policy within the next six months to a year, avoiding credit checks could help keep your credit score in a range that provides you a more favorable car insurance premium. Hard credit checks, the credit pulls that typically occur when applying for a loan or credit card, typically negatively affect your credit score for some time after the credit check occurs.
If your credit score is low, it may be beneficial to set up a monthly budget for your expenses to have greater insight into your finances. An insurance analyst for Bankrate.com, Stephen Kates, says, “The largest factor in your credit score is your payment history. Paying on time every time will make the biggest difference in your score over time. The second is credit utilization, which is the amount of credit you are using relative to the total amount you have available. If you are using more than 30% of your credit over a long period of time, your score can deteriorate. Using a credit monitoring system can help you keep tabs on your progress and catch any mistakes before they hurt your score.” While building your credit takes time, it can be worthwhile for auto insurance savings — the average full coverage premium in the U.S. for drivers with excellent credit is $1,487 a year.
Prepare in advance for your teen
Because of their lack of driving experience, teens tend to be expensive to insure. The average married couple can expect to pay an extra $1,800 a year on top of their current insurance premiums after adding a teen driver. If you decide to purchase a vehicle for your teen, expect these insurance costs to be even higher.
The best way to keep auto insurance costs down is to compare quotes from several providers when you add a teen to your policy. Another cost-saving measure is considering what kind of car your teen will drive; new cars typically cost more to insure and are more expensive to replace if damaged. Lastly, although it can be tempting to reduce insurance coverage to offset the added costs, teens are more likely to get into accidents. Purchasing more coverage can save you from paying more out of pocket if the worst should happen.
Understanding the rating factors surrounding teen drivers can help you prepare to take advantage of discounts for a young driver. Many companies offer discounts to full-time students under 25 who maintain a B average on their report cards. Additionally, several companies offer discounts for driver training programs and safe driving habits. Keep in mind the increase for adding a teen will not last forever. You should see your premiums decrease over time as your teen gains more driving experience.
Various factors go into determining your auto insurance rates, providing several areas of opportunity for you to save. Once you have found auto insurance savings, you can repurpose them to benefit other areas of your life. Bankrate’s True Cost Rank provides a way to break down the sum of your annual auto expenses and determine where adjustments might be needed to acquire additional savings. The returns may seem small at first but could have a significant impact on your long-term financial goals.
If you have credit card debt, using your newfound auto insurance savings to pay it down could be a wise choice. As credit scores also impact annual premiums, putting auto insurance savings towards paying off credit card debt could save you money on both immediately, with a reduced monthly debt repayment amount, and in the long-run with savings on your car insurance premium due to an increased credit score.