The true cost of auto insurance in 2022

The table and map above allow you to explore what proportion of income drivers are spending on auto insurance by state and metro area. Nationally, drivers spend an average of 2.57% of their income on car insurance coverage. In certain regions, drivers spend a much higher percentage than average, while in others, drivers spend a lower percentage.

Louisiana drivers spend the highest proportion of their money on auto insurance, at 5.26% of their income, followed by Florida at 4.42%. And, of the metro areas analyzed, Tampa and Miami drivers spend the highest percentage of income on their car insurance, delegating an eye-popping 4.49% and 5.58% of their annual income to auto insurance coverage, respectively. One reason these states may experience high true costs is that hurricanes and flooding are common, which may drive up insurance rates. Paired with the relatively low median incomes in both states, residents end up putting a significant portion of their budget toward car insurance.

Your geographic location isn’t the only factor that affects your car insurance rate. Life events like a change in your credit score (in most states), driving history and adding a teen to your policy usually affect your rates and the proportion of your income spent on car insurance.

The average cost of car insurance in the United States is $1,771 per year, claiming 2.57% of the average American’s annual income. Your individual car insurance rate depends on personal characteristics, so it will likely differ from the national average. Several factors that impact your car insurance include things like credit score (in most states), vehicle make and model, driving record and the characteristics of drivers insured on your policy.

Credit score

Policyholders with high credit scores tend to file fewer claims than policyholders with lower credit scores. For that reason, car insurance companies in most states use your credit-based insurance score to help determine your premium. One way to lower your car insurance premium is to improve your credit score. On average, drivers with excellent credit pay a shocking $1,146 less per year for their car insurance than policyholders with poor credit. Note that the use of credit as a rating factor is prohibited in California, Hawaii and Massachusetts. In Michigan, while insurers are not allowed to use your credit score as a rating factor, they can use some of the information that contributes to your credit score to rate your policy, such as a history of missed or late payments.

Standout statistics:

• Wisconsin drivers carrying full coverage car insurance experience an average rate increase of $4,128 — the highest of any state — when their credit score goes from ‘good’ to ‘poor.’
• Of the states that use credit-based insurance scores as a rating factor, North Carolina drivers experience the lowest average increase on full coverage car insurance — only $351 — when their credit score goes from ‘good’ to ‘poor.’

• Car insurance cost by credit score

  	Average premium	Percent of income spent on car insurance
  Poor credit	$3,002	4.35%
  Average credit	$1,907	4.36%
  Good credit	$1,771	2.57%
  Excellent credit	$1,556	2.26%

Vehicle choice

Your vehicle choice significantly affects your car insurance rate. On average, the cheaper your vehicle, the lower your car insurance rate will be. Typically, sedans are cheaper to insure than coupes or SUVs. Luxury vehicles, sports cars and vehicles equipped with advanced technology will likely be much more expensive to insure than a basic sedan. For instance, for full coverage car insurance, it costs $747 more per year to insure a luxury BMW330i than a Ford F-150 truck.

Generally, the safer your vehicle is, the cheaper it will be to insure. If a vehicle comes equipped with top-notch safety features, drivers may see lower insurance rates — although it will depend on how expensive those safety features are to replace. Expensive sensors and cameras can drive your car insurance cost higher in some cases. In addition to safety features, your vehicle’s weight has a bearing on safety. Heavy vehicles are more likely to protect the passengers and driver, which could help lower insurance costs. However, heavy vehicles can also cause significant damage to another vehicle in an accident, which could increase premiums. As a result, you may see heavy vehicles like the Ford F-150 with average rates around the national average, rather than much higher or lower.

If you’re on the hunt for a new vehicle, you may want to compare the following car insurance averages. While your actual rates will differ, these rates offer a starting point for comparison.

• Car insurance cost by vehicle

  	Average premium	Percent of income spent on car insurance
  Toyota Prius	$1,924	2.79%
  Honda Odyssey	$1,542	2.24%
  Ford F-150	$1,523	2.21%
  BMW330i	$2,270	3.30%
  Toyota Camry	$1,771	2.57%

Driving record

Your driving record significantly impacts your car insurance rate, since insurance companies often see a poor driving record as an indication that you’re likely to file a claim in the future. An at-fault accident can drive up your rates considerably, but of any incident, a DUI on your record increases your rates the most. Drivers with a DUI pay an average of $1,650 more per year for their full coverage insurance than the national average. After an incident, you may want to check with your car insurance provider to see if it offers discounts for participating in a telematics program or a driver’s safety course.

Standout statistics:

• After getting into an at-fault car accident, Rhode Island residents see the lowest insurance rate increases of any state, with an average added cost of only $50 per year.
• California drivers see an average annual rate increase of $1,436 after an at-fault accident, the highest of any state. And Los Angeles drivers experience an average increase of $1,636 per year after causing an accident, the highest of any metro area we analyzed.

• Car insurance cost by driving history

  	Average premium	Percent of income spent on car insurance
  Clean driving record	$1,771	2.57%
  Lapse in coverage	$1,949	2.83%
  Speeding	$2,138	3.11%
  At-fault accident	$2,521	3.66%
  DUI	$3,421	4.97%

Teens

Life events may also affect your car insurance rate. Adding a teen to your car insurance policy can cause one of the most significant rate increases for the average driver. And, in many states, your marital status can affect your car insurance rates. Married drivers pay an average of $103 less per year for full coverage car insurance than the national average. However, married couples with a teen on their policy pay an average of $1,998 more than the national average.

Standout statistics:

• After Hawaii, which does not use age to calculate insurance premiums, Iowa drivers see the lowest average annual premium increase when adding a teen to their car insurance policy, with a total increase of just $1,034 per year over the state’s average annual rate of $1,254.
• Of the metros analyzed, Portland has the lowest average annual rate increase after adding a teen driver, at just $1,827. Meanwhile, Miami has the highest average rate increase of $3,891 per year after adding a teen driver.

• Car insurance cost from adding a teen driver

  	Average premium	Percent of income spent on car insurance
  Married	$1,668	2.42%
  Married with teen on policy	$3,852	5.59%
  National average	$1,771	2.57%

Relocate in your metro

Car insurance rates may vary between ZIP codes in the same metropolitan area, since factors like crash statistics and cost of living vary between neighborhoods. For instance, Hopkinton, Massachusetts lies 30 miles west of Boston, and its distance from the city likely contributes to lower crash rates and a lower cost of living than neighborhoods like South Boston or North End. However, before relocating to a different ZIP code, you may want to consider your commute costs. Will you save money on your car insurance but pay more in gas and vehicle maintenance costs?

You may save even more by relocating to a different metro in your state. For instance, Florida drivers who live in Miami spend an average of 1.84% more of their income on car insurance than Orlando drivers. Car insurance alone may not be a sufficient reason to relocate, but if you’re already considering a move, you may want to consider the true cost of car insurance in each metro.

Key factors may disrupt the auto insurance industry in 2022 and beyond. Broader shifts in the economy — like historic inflation increases, pandemic-induced supply chain disruptions, and international sanctions affecting gas prices — may have the most immediate effect on consumers’ wallets.

• • Inflation may continue to push premiums upwards

    
    Prices of car repairs and replacements are higher than ever thanks to historically high inflation. And recently, several insurance companies have increased premiums by around 7% to keep ahead of inflation, according to the Wall Street Journal. Last month, the Federal Reserve increased the price of borrowing money by a quarter point and announced its intention to hike rates six more times in 2022. While this move could help reduce inflation by discouraging spending, the higher cost of borrowing could negatively impact consumers with car loans, mortgages and more. So what does inflation mean for your household’s budget?

    Zachary Finn, Director of Risk Management at Henriott Group, told Bankrate that “every ingredient in the recipe for an auto claim is more expensive” amid high inflation. Ongoing supply chain issues mean car parts could be stuck on backorder for weeks, Finn says. Longer wait times for vehicle repairs could mean you’ll need a rental car for longer, at a time when “travel is experiencing a post-COVID pop.” According to Finn, elevated rental car demand and higher vehicle repair costs means higher insurance premiums.

    But Finn emphasizes that consumers can take steps to protect their wallets. “One of the dials consumers can adjust to lower their premium is to look at a higher deductible,” Finn says. “A willingness to take a bigger bite of the loss is something insurance companies love to reward.” He says “Another dial consumers can adjust is to switch to an insurer that offers a pay per use/mile premium plan.” Finn is careful to note that this solution likely only works if you plan to drive less, but if your workplace gives you the option to work from home for a few days a week, a low-mileage insurance plan could save you money.
    

  
  

  • The way insurance companies calculate your premium may evolve

    
    Historically, insurance underwriters have evaluated how risky an applicant would be to insure based on certain key characteristics. Now, some companies are striving to make the risk-assessment process more accurate through artificial intelligence (AI). For instance, car insurance company Root uses a driver’s actual driving behavior as the primary factor for determining their car insurance premium. The company allows drivers to take an in-person driving test and tracks their habits electronically to decide whether to insure the driver and what premium to assign them.

    More personalized underwriting systems like Root’s are meant to help policyholders pay a fairer price for their insurance rather than a rate based solely on their demographic. But is AI underwriting the way of the future?

    Jon Godfread, North Dakota Insurance Commissioner and Secretary-Treasurer of the National Association of Insurance Commissioners (NAIC), told Bankrate that while many insurance companies use AI in underwriting, it’s not yet mainstream. Several issues must be resolved before AI can be adopted across the board, he says. To reach widespread use, Godfried believes companies will need to confront “the potential for bias in the data” and nail down “where that data comes from.” He also warns that the market may not yet trust the results from AI rating and underwriting. Overall, Godfried predicts that “we are at the very early stages of what could be a technological revolution for the insurance industry.”

    In addition, California, Hawaii and Massachusetts prohibit the practice of using credit to determine premiums. In Michigan, insurers cannot use your credit score to determine your rate, but they can use some of the information that goes into your credit score, such as a history of late or missed payments. In other states, lawmakers, activists and economists increasingly see credit scoring as economic discrimination. Last year, legislation around the issue was introduced in Colorado, New York, New Jersey and Oregon, according to NBC News. And legislation in Washington is ongoing about whether to confirm a ban on insurers using credit scores. With more visibility on how rates are calculated, continuing legislative progress is possible.
    

  
  

  • Other vehicle ownership costs may change

    
    Shortages in the availability of semiconductors, also called “chips,” have caused used car prices to surge. As of February 2022, used car prices are 41.2% higher than the same month in 2021. The U.S. Labor Department’s Bureau of Labor Statistics reported that gas prices have spiked by 38% between February 2021 and February 2022. While gas prices were already rising due to high inflation, this gas spike can also be attributed to events currently unfolding in Europe. You might be wondering: are skyrocketing prices permanent or temporary?

    Greg McBride, Bankrate’s chief financial advisor, says “Inflation is still accelerating and there are no indications we’re at a peak level. With higher prices for commodities such as food and oil, and renewed supply chain issues, inflation is likely to get worse before it gets better. There is hope that prices will level off and inflation will recede later in the year, but so far it is nothing more than hope.”
    

  
  

  • What do these trends mean for me?

    
    According to McBride, consumer prices are increasing faster than incomes, which puts a squeeze on household budgets. He explains that “High prices may not limit how much consumers spend, but rather, where they spend their money. The more money that goes into the gas tank and is spent at the supermarket, the less money left over for discretionary spending.”

    McBride also predicts that Americans will postpone building their savings in favor of spending on travel and other experiences that were unavailable during the pandemic. “Add in the squeeze that inflation is putting on the household budget, and it will make it all the more difficult to make headway on savings,” McBride explains.

    Outside of inflation and broader economic trends, many factors that affect your car insurance premium are within your control. Personal characteristics like your driving record, claims history and geographic location affect your premium significantly. If you have a less-than-ideal driving record, you may want to ask your insurer if you can take an approved driver safety course or enroll in a telematics program to earn a discount on your premium. If you live in a high-cost area, you may want to consider relocating within your metro. It may be useful to talk with your friends and family about how they keep their car insurance costs low, or to chat with an independent insurance agent who may be able to help you find a cheaper insurance provider for you.