Tyron Jones
Personal Finance Expert
Updated: 10/2022
Tyron Jones is a finance expert who has operated within the auto insurance business for more than 10 years. He has written many other finance related articles for a number of prominent publications.
Car insurance rates differ from state to state and from insurance company to insurance company. Estimating your auto insurance costs in your area requires knowledge of a number of factors that contribute to your rate. The good thing is that car insurance calculators can do the work for you and that’s just the job of providing you with a fair estimate. If you want to lower your insurance rates, you must take a look at the factors determining your insurance. Then consider options you have, and use the calculator and see how you can save money.
Your Insurance Options
First, let’s look at the types of auto insurance you can buy. There are many kinds of auto insurance out there, but only three kinds of auto insurance form the basis of the coverage. They are comprehensive, collision and liability.
Comprehensive Insurance
Comprehensive insurance covers everything in the event that you are in an accident. The coverage includes damage to both cars, property, all injured parties and it also covers you if a tree falls on your car.
Collision
Collision insurance is as close to normal insurance as you can get in that it covers everything affected by the accident, including injuries and property of both parties involved. If you hit a car, the collision will cover damage to everyone injured in the accident and the property damage to both vehicles.
Liability Insurance
Liability auto insurance covers all the damage that you become liable for after a chargeable accident. That does not include your automobile, but it does cover injuries to anyone riding with you and to the other party, and to the other party’s property.
These types of insurance are the main categories of insurance, and they are priced according to their coverage, so comprehensive is the most expensive and liability is the least expensive. You can buy other insurance to complete your coverage, but you might want to do a little research and ascertain if you really need it.
If you just bought a new car and you took out a loan, the lending institution will probably insist that you buy comprehensive and pay for that length of coverage for the length of the loan. At the end of the loan period, you have the option to downgrade your insurance. Often, it’s overpriced compared to the value of your car at the end of the car loan period. If your car is worth only $6000, it’s hard to justify a car insurance policy that costs thousands of dollars a year.
On the other hand, if you downgrade your insurance to liability, your vehicle will be a complete loss if you get in a chargeable accident. The bottom line then is do you have the funds to replace the vehicle you are driving? If not, then you might want to at least pay for collision insurance so your vehicle is covered.
Risk Factors
To understand why so many factors go into estimating your car insurance you must appreciate that the insurance company’s premium is determined by generalizations they make about drivers. They make generalizations about the age of drivers, their neighborhood, their occupation, their income and their driving record. Even a person’s credit history affects how insurance companies calculate your insurance. Studies also indicate that occupation, and income level trump the driving records in many instances, and a perfect driving record means little to insurers.
Good and Bad Drivers
The risk the insurance companies assume is based on pools of people. Whenever somebody in your pool files a claim, it’s as though everybody filed a claim because everybody in the pool has to pay. This pay is reflected in the calculation of your insurance rate. If you never file a claim and you have never received payments from the insurance company then you have spent a lifetime paying for other peoples’ mistakes. That’s how insurance companies cover their risk. Good drivers pay for bad ones.
State Regulation
Every state regulates its insurance industry, and that factor also affects your insurance rates. On the whole, you pay more in California than you do in Minnesota because different states have different regulations. And each state varies on how much a factor can affect insurance rates too.
Beyond what the state allows as acceptable practices, the insurance companies charge different amounts for different factors. One insurance company differs from the other in how they charge drivers more or less
What Factors?
All this adds up to your risk factors. Why do you pay more for car insurance? It’s your risk factors. This is where you can take the bull by the horns and lower your insurance rates. The way to understand your numbers is to compare them to your neighbor’s numbers. The place to start is to discover the average insurance premium a person in your state pays and what factors determine the price. You can shop around and buy insurance you want by knowing your risk factors.
When you start calculating your insurance cost, you must start with a mean. If you know the risk factors going into your insurance rate, you can shop more effectively for insurance. There are factors you can manipulate to lower your premium. Increases or decreases to your insurance occur because of these factors:
Age
Age is important because young people are a high-risk category. At the other end of the scale, elderly people are also a risk group, but they don’t suffer as significant a rate hike. The insurance rates reflect statistics that indicate young drivers and elderly drivers get into more accidents. Between the ages of 16 and twenty- years, the driver is at significant risk to get into an accident. Young drivers won’t see a rate decrease until age 25. You pay a much higher rate until that age than you do at the other end of the scale, but the rates for the elderly start to rise after age 55. Because both ends of the age chronology increase, the inexperience of the younger leads to higher costs. At the elderly end, some ignorant insurance buyers may not even notice the rate hike, or they may write it off to inflation.
Where You Live Matters
It stands to reason that the more cars and the greater congestion in your neighborhood might affect insurance rates, and where you live is a major factor in auto insurance calculations. Densely populated areas create risky environs to drive in, and if you live there, your rates will increase. The more congestion and traffic, the more likely you’ll be involved in an auto accident. Since car theft is a major source of claims filed with insurance companies, a densely populated area where more cars are stolen also factors in the price of the premium.
The Make and Model of Car
When you witness the crash test dummy in a safely rated vehicle, you can see how collisions work. If you own a model with an award from of the National Transportation Safety people, you should get a break from your insurance company. Much of your insurance coverage goes to paying for injuries in a car collision. If your car is invincible, chances are good you’ll pay less. If you like driving a luxury automobile, you may pay more insurance because the cost of repair is higher. You may even pay more for an ordinary foreign car because foreign parts can be more expensive. If your car is a desirable make or model in the mind of car thieves, and you don’t do anything special to protect it, you are risky. Since young people like cars with a lot of power, racing stripes, and attractive makes and models, their insurance goes up, and they’re already being penalized for their youth.
Are You Married, Divorced or Widowed?
Married people enjoy a cheaper rate because single people are higher risk drivers. It‘s not clear whether this is because traditionally, younger people also tend to be single, but it is how it is. What’s even more bizarre is that divorced and widowed people also suffer rate hikes. Is this because they’re grouped together with single young people, or do dotty old widows really get into car wrecks more?
You may have heard of people getting a break on their car insurance because they combined the coverage of their home with their auto insurance. So, it goes with married couples who combine the cost of insuring more than one automobile in a family policy. The end result is a lower rate. Married people have it much better than single people.
Your Driving Record
Perhaps the only true measure of the driving riskiness of an arbitrarily chosen person is their driving record. Insurance companies look at that closely and assign levels of riskiness dependent on how many accidents can be found and how many moving violations have been issued. A DUI is taken very seriously by an insurance company, and you’re immediately put in a high-risk group if convicted but that doesn’t mean it’s impossible to get cheap DUI insurance. It’s a good idea to check your driving record from time to time to make sure there is nothing untrue there. You should get an untrue statement fixed before you contact an insurance company about coverage.
Your Annual Mileage and Daily Drive Time
Have you ever wondered why an insurance agent inquires about the number of miles you drive annually, and what your daily driving routine is? The more miles you drive every year, the greater a risk you are to get in an accident. In addition, the daily driving habits tell an insurance agent whether you will be in congested traffic every day.
Your Credit History
A poor credit history really has no logical connection to your driving record, but the insurance industry may increase your insurance premium by as much as 70 percent for a low credit score. That’s a hefty increase and it may be why some states have made the practice illegal.
As you can see, the nothing about auto insurance is What-you-see-is-what-you-get, and nobody would blame you if you didn’t understand the hidden costs of auto insurance. The best thing to do is use an insurance buying service that can get you the best rate. You can estimate what a policy will cost and buy auto insurance that you feel comfortable with.
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FAQ
We often receive questions about auto insurance cost estimations and the mechanisms behind them. If you have any questions about this subject, check out the various FAQ sections below!
Cost Estimation Process FAQ
If you have questions about the cost estimation process, make sure to check out some of the questions on this page.
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How do insurance companies estimate car value?
Insurance companies have a lot of information that helps them determine vehicle value. But they also sometimes focus more on the cost to replace the vehicle, rather than the vehicle’s actual value.
How do insurance companies estimate car damage?
Insurance companies will assess the damage to your car to estimate how much it will cost to fix. They normally use an insurance adjustor to do this — you can challenge their findings if you don’t agree.
How to estimate car insurance before buying a car?
There are tons of great websites that can help you help you calculate insurance before you purchase. In many cases, you can get a quote before your purchase the vehicle.
How to estimate car insurance cost?
If you’d like to estimate your car insurance costs, it’s sometimes best to get a quote from a variety of different providers. You can typically do this by heading online and seeking quotes through various website. Remember for most companies your credit score matters but you can still find cheap auto insurance no credit check required.
How is insurance value estimated for a totaled car?
Car insurance companies have tons of data that can help them estimate the value of your car and how much it will cost to replace. If you don’t like they’re evaluation, you can challenge it.
How to estimate car insurance payments?
If you want to estimate your car insurance payments you should ask for a quote from a provider. You can ask for multiple quotes without committing to anything, so this is always a good option. Look for the best car insurance for bad drivers if your record is tarnished.
How is car insurance calculated?
Car insurance is calculated using a variety of different factors, including your driving record, age, vehicle, and a host of other components.
How do car insurance companies calculate your risk?
They have a lot of information that can help them calculate your risk. They’ll take your age and driving record into consideration as well — they often consider the neighborhood you live in if you’re looking for comprehensive coverage.
How much in average is insurance for rental cars?
There is no definitive average because it depends on so many different variable. For example, are you over the age of 25? How expensive is the vehicle you’re renting? Do you have your own insurance? These all matter.
How much is an average insurance on 2 cars?
Considering the average insurance cost in America is around $1400, the average for two cars will be typically just under $3000. This is one of the reasons people will bundle it with their home insurance to get more affordable auto insurance.
How is car insurance calculated a hail damage on car?
This will depend on the price of replacing the panels and other components of the car. It also depends on the extent of the hail damage. It’s always important to park your car undercover if you live in an area that experience extensive hail.
How to calculate the 10 percent rule on car insurance?
The 10 percent rule is a theory that when the costs of the premium on a comprehensive and collision plan are costing you more than 10 percent of your vehicle’s value, it may not be worth having. Learn more about how to save money on car insurance.
How insurance companies calculate car accident settlements?
Each insurance company will have its own calculation method — the exact methods behind this are not publicly accessible.
How insurance calculate car value for total loss claims?
Insurance companies have a lot of information and data they can use to determine the value of the car, as well as the cost of replacing the car. If you don’t like their judgement, you can contest it for a higher value. Though it might not work.
Insurance Cost FAQ
If you’d like to get some more information about insurance costs, check out the FAQs in the section below.
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What is the average auto insurance cost?
In the United States, the average auto insurance cost is $1,426 — this is a lot of money. Keep in mind it can change on a year-by-year basis. Get a quick car insurance quote with the form above to see what your cost would be.
What is the average auto insurance deductible?
You can normally choose your own deductible by paying more or less for your insurance, so there’s not really an average deductible — you have flexibility.
What is the average auto insurance liability coverage?
There’s no exact information on the average liability insurance coverage, but many people have up to $100,000 in coverage for liability injury.
What is the average 6 month auto insurance premium?
It depends on the state that you’re living in. In some states, it can be in the $400 range, while others can be more than $700 for the six months! Get a quotes from companies like State Farm, Geico, USAA, State Farm, Allstate, & Progressive.
How much is the average auto insurance for Mercedes?
This will depend on the model of Mercedes that you’re purchasing. In many cases, Mercedes owners pay much more than $2,000 a year for their insurance. We answer how much does car insurance cost in another more in depth article.
What are average auto insurance rates monthly?
The average monthly auto insurance rate in the United States is around $118 — this can be a significant bill for many American families. If you need something even shorter term you can ask the agent for a weekly car insurance quote.
What is the average auto insurance cost in Houston?
While there isn’t too much information on the average auto insurance plan in Houston, the average auto insurance plan in the state of Texas is over $900.
What is the average auto insurance cost in Oklahoma?
The average monthly insurance cost in the state of Oklahoma is around $800 per month. This makes it a fairly affordable state for auto insurance.
What is the average auto insurance premium in Florida?
The average auto insurance plan for a resident in the state of Florida is just over $1,000 a year. This makes is a fairly expensive insurance plan.
How much is average car insurance for 22-year-old?
This depends on the amount of coverage that you’re looking for and the state that you live in. In many cases, auto insurance for 22 year olds will exceed $2,000 per annum.
How much is average car insurance for 25-year-old?
As you get older, your insurance costs continue to fall. At the age of 25, you can expect your average insurance cost to be around $1,500.
How much on average is women's car insurance?
If you’re looking for a six-month premium, a woman’s car insurance plan will be around $740 for the six months.
What does an average college student pay for car insurance?
Auto insurance for college students can be extremely high. The average cost of auto insurance for college students in the United States is over $3,500. You can sometimes receive discounts for having good grades.
What is the average cost of car insurance for internationals?
The average for a car insurance plan for an international driver will depend on a variety of different factors, including age, country of origin, vehicle, and more.
What is average auto insurance rate for family of 2?
This will depend on the ages of the people in the family, the level of coverage that they’re looking for. You can get free quotes from many insurance providers.
How much is the average teenage car insurance?
This will depend on the age of the teenager, the vehicle they’re driving, the state they live in, and their driving record. You can get free quotes from many providers to find the cheapest car insurance for teens.
What is the average car insurance for first time drivers?
The average car insurance cost for first time drivers will depend on the age of the driver and the vehicle they’re driving.
What is the average car insurance cost in California?
The average cost of car insurance in the state of California is around $840. While California is known for being expensive, its auto insurance rates are actually much lower than the national average!
Does car insurance cost less with a B average?
This depends on your provider. There are now plenty of insurance companies that offer cheaper auto insurance rates for people who can prove they have good grades at college — it’s a form of student discount.
How much average comprehensive insurance on a new car?
Unfortunately, it’s hard to estimate this because the average cost of comprehensive insurance will vary greatly depending on the value of the car that you drive. You can obtain free quotes extremely easily on the internet if you want more information.
Other Cost Estimator FAQ
If you have any other questions about cost estimation and insurance, check out some of the questions below
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Can I deny car insurance adjuster estimate?
Yes — you can always appeal against an estimate that you feel is not correct. The only problem is that it won’t always work. Seek an independent estimate if you feel you’re being ripped off.
Will the car insurance estimator write out check immediately?
This will depend entirely on the situation around the accident and the insurance provider that you’re working with. In many cases, it may take a while to receive your claim. You can ask in advance.
How to calculate NCB for car insurance?
You NCB will depend on your insurance provider. There are now a few insurance companies that offer no claims bonus, but make sure to ask your insurance provider what the bonus is worth.
How to calculate car insurance payment?
You can calculate a car insurance payment by heading online and seeking a quote from an insurance provider. This can give you a good estimate of what you’ll probably owe each month.
How to calculate IDV for car insurance?
This will depend on the manufacturers value of the vehicle if the vehicle is new. In many cases, it will be around 95% of what the car is advertised for.
How to calculate no claim bonus for car insurance?
A no claims bonus will vary depending on the type of insurance provider that you’re working with. You can always ask your insurance company what the NCB is worth.
How to calculate third party insurance for car?
You can’t really calculate third party insurance on your own because it will depend on what an insurance provider is willing to provide you with. You can seek a quote if you want to know how much it will cost.
What is the average deductible for car insurance?
There is no ‘average deductible’ as you can choose your own deductible in most circumstances. If you want a lower deductible, you’ll have to pay more.
What is an average payout for an auto insurance settlement?
It is thought the average settlement is around $21,000, but will vary greatly depending on the circumstances of the accident. Some people get much more, others get barely anything at all.
What is the average insurance settlement for a car accident?
As mentioned above, the average settlement is around $21,000. But you should keep in mind that there are many people who get much more, and many who get much less.
What is the average down payment for car insurance?
This depends on your provider. It is thought to range between 8% and over 30%, depending on the provider that you’re working with. Ask about car insurance with no down payment because sometimes there are promotions.
How much is average car insurance for a new driver?
This depends on your age, but if you’re a new driver that is a teenager you can expect to pay over $2,000 per year — car insurance is expensive if you’re young.
What is the average duration to change car insurance?
This will depend if you’re locked into a policy and how quickly you want to change. If you don’t have any policy, you can switch providers extremely quickly. You can also cancel your current policy, but you may have to pay a fee.
How to calculate insurance premium for new car?
You should seek quotes if you want to calculate the insurance premium of a new car. This is the best way to get a realistic picture of how much your insurance will cost. So shop for insurance on comparison sites like ours to do this.
How is 1st payment of car insurance calculated?
The first payment may also include a down payment, and this will depend on the provider that you’re working with. In some cases, it’s not a lot, but other times you may be charged over 30% of the value of the policy.
