If you want to ensure you’re getting the best price on your car insurance policy, you need to know what determines your premium.
Although car insurance prices may seem mysterious, the ways that insurance companies come up with their rates are fairly straightforward — and in some cases, you actually have some amount of control over what your premium ends up being.
In this article, we’ll go over the average annual and monthly costs of car insurance, how to save on your premium, and some providers to consider if you’re looking for great coverage at a great price.
To help you make sense of the complex auto insurance landscape, we’ve researched and ranked the top auto insurance providers in the United States.
In this article:
- How Much Does Car Insurance Cost?
- What Affects Car Insurance Rates?
- Discount And Rewards Programs
- Provider Rate Comparisons
- Provider Reviews
- How Often Should You Shop For Car Insurance
- Final Tips
How Much Does Car Insurance Cost?
This is a deceptively simple question. While the average annual cost of car insurance in the United States is $1,470 or $122.50 per month according to TheZebra.com, it’s hard to really gain any valuable information from just this one figure. Indeed, the cost of car insurance can vary widely based on a driver’s age, their insurance provider, the extent of their coverage, their state, and even what vehicle they have.
The only way to truly get an idea for how much car insurance will cost you is to pick out a few insurance providers that you’re interested in, request some quotes, and compare them. That said, we’ve researched the average premiums from various auto insurance providers and compared them to each other to find out which providers have the highest and lowest prices. While your actual insurance rates may not align with our findings, this can give you an idea of which companies generally charge more or less than others.
However, before we get into that, you’ll need to understand a bit more about the types of coverages that are available and what factors go into your premium to make sense of the prices.
What Affects Car Insurance Rates?
The primary factors that affect car insurance rates are:
- Coverage level
- Driving history
- Your vehicle
- Your state
Let’s look at each of these one by one.
A car insurance policy is not made up of one type of insurance. Instead, it’s a combination of a few different types of coverage that are packaged up into one product we refer to as an auto insurance policy. The six types of insurance you need to know about are:
- Comprehensive coverage: This covers damage to your car that isn’t due to a collision, such as vandalism, theft, storm damage, etc.
- Collision coverage: This covers damage to your car that is incurred during a collision with another vehicle or an object, no matter who is at fault.
- Liability coverage: This covers you for damages and injuries to other people and their property. It also covers your legal fees, should you end up being at the wrong end of a lawsuit.
- Personal injury protection: This covers any personal medical expenses and sometimes lost wages that were caused by a car accident.
- Uninsured/underinsured motorist protection: This covers you in case an uninsured/ underinsured driver causes damage or injury to your vehicle or yourself.
- Medical payments coverage: This covers any medical expenses due to an accident for anyone in your car at the time.
Some insurance providers also offer additional coverage options such as:
- Rental car reimbursement: This covers the cost of a rental car should your car become undriveable after an accident.
- Gap insurance: This covers you in case your financed car or lease is totalled before the end of the term.
The amount of coverage you decide on will affect the cost of your premium.
Full Coverage Vs Minimum Coverage
Types of coverage can be largely divided into two umbrella terms: full coverage and minimum coverage. When someone refers to a full coverage auto insurance policy, they mean a policy that has:
- Liability coverage
- Collision coverage
- Comprehensive coverage
On the other hand, a minimum coverage policy refers to an insurance policy that only meets the bare minimum legal requirements set out by the driver’s state. In most states, this amounts to just liability coverage. Some states require additional insurance, while others, like Virginia, don’t require insurance at all if the driver pays a fee to the state. Each state also sets minimum amounts that must be covered, for example $30,000 in bodily injury liability insurance, or $5,000 in property damage liability insurance.
It’s generally recommended that drivers get full coverage insurance despite the higher price tag. Unfortunately, if the worst comes to pass, you likely won’t be able to cover all your expenses with just the minimum required insurance. This can leave you with huge bills and can lead to financial ruin for some.
Young drivers are a major risk for insurance companies. Besides the data showing that drivers under 25 are more likely to get into accidents than their older counterparts, young drivers also don’t have a long track record that they can rely to prove they can drive safely.
While a 40 year old with a clean driving record who’s been driving since she was 18 has 22 years of experience to rest on, a 20 year old has a measly two years. That driver could be a very safe one or a very reckless one, but the insurance company has no way to know, so the company will raise its rates to adjust for the heightened risk and uncertainty.
Generally, car insurance rates experience a sharp decline after age 25, stay level from 30 to 65, and then begin to increase as drivers enter their senior years.
While driving history sometimes goes hand in hand with age, it doesn’t always — a longer driving history isn’t always a better one.
If you’ve had a clean driving record without any accidents or traffic violations, then you’ll get a reduced rate on your car insurance. Unfortunately, accidents of any type, whether they’re your fault or not, can steeply raise your auto insurance premium. In fact, a single at-fault collision will raise your yearly premium by $617 on average, according to The Zebra.
Some cars are more expensive to insure than others. For example, an insurance provider is going to need to pay much more to fulfill a claim from a driver who totalled their Ferrari than it would for a claim from a driver that did the same to their Ford Fiesta.
Insurance companies will take the value of your car into account when making a quote for you as well as the safety features of your car. If your car has active safety features that make it less likely you’ll get into a collision or anti-theft devices that reduce the likelihood of your car getting stolen, you should see a decrease in your premium.
Each state has its own risks associated with driving. For example, Pennsylvanians need to learn how to pass Amish buggies on the road. Doing so improperly or without enough practice can cause accidents, making Pennsylvania a slightly more risky state to drive in compared to some others, and consequently a state that will gain a higher average premium.
Additionally, each state sets its own minimum insurance requirements. States that have more requirements will necessarily have a higher starting premium, as every resident will need to take out a higher level of coverage.
Discount and Reward Programs
To entice drivers to sign on, some insurance providers offer discounts and rewards programs for motorists that meet certain criteria. Common examples include:
- Multiple car discount: Drivers purchasing a policy for more than one vehicle may receive a discount.
- Good student discount: Students that meet certain academic requirements can receive a discount on their auto insurance premium.
- Federal employee discount: Federal employees receive a discount on their premium.
- Good driver discount: Drivers who maintain a clean driving record for a certain number of years can receive a discount on their premium.
Depending on their provider, drivers may receive discounts on their entire premium or just one portion of their policy, like their liability coverage, for example. However, in the end, this still ends up meaning more money in your pocket at the end of the month or year.
Provider Rate Comparisons
Here are a few sample average premiums from some of our recommended insurance providers.
|Best For||Financial Strength Rating (From AM Best)||Customer Service Rating* (Out Of 5)||Coverage Rating* (Out of 5)||Cost|
Students and Military
Students and Teens
* Based on our research
Here’s a closer look at some of our recommended providers.
As the largest car insurance provider in the United States, State Farm has earned a reputation for low rates, its large network of agents, and its many discount opportunities.
Reputation and Financial Strength
State Farm received the highest financial strength rating from AM Best: A++. This indicates that they have the financial wherewithal to fulfill claims. However, they only received a 3/5 Claim Servicing rating from J.D. Power. That said, every other top insurance provider we researched except for USAA received the same rating, so it’s about average as far as claim fulfillment goes.
Pricing and Coverage Options
State Farm offers standard coverage as well additional options like rental and travel insurance, classic car insurance, and sports car coverage.
We found State Farm to have the lowest annual full-coverage premiums out of all the companies we reviewed that are open to the general public. The only company that has lower average rates is USAA, but only active military members, veterans, and their families are eligible for USAA coverage.
Out of all State Farm’s coverage options, we were most impressed with their travel and rental insurance, which not only reimburses drivers if they need a rental car, but also covers the cost of lodging and food if the driver is stranded more than 50 miles from home.
Discount and Reward Programs
State Farm offers a sizable number of discount and reward programs. These include:
- A good student discount
- A discount for drivers under 25 who complete a driver safety course
- A multiple vehicle discount
- A discount for purchasing both home and car insurance
Unfortunately, State Farm does not currently offer a discount to military service members.
Overall, customers are satisfied with their service from State Farm. Online reviews are generally favorable, and the company has a normal amount of complaints for a provider of their size.
State Farm is a high-quality insurance provider that offers good coverage at a competitive price. It is one of the cheapest providers we’ve found, and there are several discounts drivers can take advantage of to further lower their price.
Unfortunately, there is no accident forgiveness program, so drivers who get into an accident may see all the money they were saving by going with State Farm evaporate into thin air once their rate is raised the next billing cycle.
Most Popular Car Insurer in the U.S.
Most popular auto insurance company that services over 83 million policies.
Geico has built their reputation on convenience and low-cost insurance policies, and as our research has proven, that reputation is built on more than just good advertising. Geico has competitive pricing and a very convenient quotation and claim filing process.
Reputation and Financial Strength
Geico has an A++ financial strength rating from A.M. Best, which is the highest rating possible. They have a strong reputation and are an internationally-renowned brand due to their creative advertising efforts. As the second largest insurance provider after State Farm, drivers should have no qualms about Geico’s reputation or financial strength.
Pricing and Coverage Options
Geico offers standard insurance options as well as some additional coverages like rental reimbursement coverage.
Geico’s prices are very reasonable, although they’re a bit higher than State Farm’s. Still, Geico’s rates are lower than most of its competition.
Discounts and Rewards
Geico has a full suite of rewards and discounts that customers can make use of:
- Senior discount
- Federal employee discount
- Emergency deployment discount
- Military discount
- Student discount
- Member and employee discounts
- Anti-theft system discount
- Good driver discount for drivers who are accident free for 5 consecutive years
- Multi-vehicle discount
- Multi-policy discount
Geico has cemented itself as a favorite among consumers largely due to their advertising strategy, and their efforts have not gone to waste. Indeed, Geico is a reputable company with a low number of consumer complaints.
It is largely tech-focused, which has made it a powerhouse when it comes to convenience. Customers can sign up and file claims directly on the website, but drivers who prefer a more personal connection can also meet with its representatives in person thanks to Geico’s many local agents.
Geico is a financially strong insurance company with a good track record of customer satisfaction. Its focus on tech coupled with its low rates will provide a good experience for most motorists. Geico isn’t the cheapest option available, but it is much more reasonably priced than many of the providers we evaluated.
Best Company Overall
Offers competitive pricing and great coverage.
USAA is the lowest-priced auto insurance provider we’ve found, but their plans are only available to military personnel, their families, and veterans.
Reputation and Financial Strength
USAA has received an A++ rating from A.M. Best, indicating that it is financially secure and capable of fulfilling claims. It has been in business since 1922 and has remained a highly-respected company since its inception.
Pricing and Coverage Options
Out of all the providers we reviewed, we found USAA to have the lowest average annual premiums.
In addition to standard coverage, USAA offers:
- Lost wage coverage
- Roadside assistance
- Rental reimbursement
- Death benefits
Discounts and Rewards
- Multiple vehicle discounts
- Good student discounts
- Home and auto insurance bundle discounts
Out of all the insurance companies that we reviewed, USAA received our highest rating. USAA has a very small share of all industry customer complaints despite its relatively large size and customer base. In general, customers are very satisfied with their coverage.
We’ve rated USAA highest out of all the insurance companies we’ve reviewed for its low prices, financial strength, discounts, and great service. Unfortunately, it is only available to military personnel, veterans, and family members, so most people will not be able to benefit from a policy with this provider.
Best for Military Families
Our best overall pick: Offers great customer service to military members and their families.
How Often Should You Shop For Car Insurance?
Car insurance rates change every year. According to a survey by J.D. Power, car insurance rates increased by 2-3% on average from 2016-2017. That means that if you shopped around for the best deal in 2016, you might no longer have it in 2017.
However, in addition to changing rates on the provider side, your finances also change from year to year, and you may be able to get a discount from a different provider that you weren’t eligible for the year before.
For this reason, many experts recommend comparing your insurance premium to other premiums every 6-12 months depending on how often your premium renews.
While you can’t control what your auto insurance premium will be, you can engage in good habits that will keep your rate as low as possible. Make sure to drive safely, take a defensive driving course, maintain a good credit score, shop around yearly for better deals, and avoid accidents and traffic violations.
We also put together a comprehensive guide on how car insurance works that you may find very helpful. We talk about how car insurance works in general, how to find a provider, what types of car insurance you need, etc.
How do I get the lowest insurance rates?
To get the lowest auto insurance rates, you should:
- Maintain a clean driving record
- Take driver safety courses
- Maintain a good credit score
- Shop around for better deals every 6-12 months
- Drive safely
- Research discounts and apply for any you may be eligible for
How much is car insurance on average?
The average car insurance premium in the United States is $1,470 per year or $122.50 per month, according to TheZebra.com. However, the average changes from state to state and will also change depending on your age, vehicle, and driving history.
Who is the cheapest car insurance company?
USAA is currently the cheapest car insurance company. However, USAA is only available to military personnel, their families, and veterans.
The cheapest non-military-exclusive car insurance company is State Farm, which is a bit more expensive than USAA.
How often should you shop for car insurance?
Motorists who want to get the best deal on their car insurance should shop around for a new plan every time they renew their policy, which is typically every 6-12 months. This will protect drivers against rising rates and also help them make use of an improving financial situation.