Most drivers wonder if they are paying too much for car insurance. After all, rising auto insurance costs continue to eat into drivers’ budgets nationwide, with a national average annual rate of $1,895.
This upward trend has left many drivers questioning whether they’re overpaying for their policies. Understanding the factors influencing insurance rates and exploring strategies to reduce costs can help ensure you spend only what is necessary on car insurance.
- Auto insurance prices are on the rise because of continued inflation and increased weather events.
- The average annual rate for full coverage car insurance nationwide is $1,895.
- Shopping around to compare quotes from multiple companies is the best way to ensure you don’t overpay for coverage.
Are you overpaying? Key indicators you’re spending too much on insurance
With car insurance costs rising, many drivers are experiencing a shock to their wallets. Since car insurance can take a big bite out of your budget, it’s natural to want to confirm that you aren’t overpaying for this necessary expense.
Explore some key indicators that you might be spending too much on car insurance below.
Your premiums haven’t changed despite a clean record
Your driving history is a key factor in determining rates. Drivers with a clean driving record can expect to pay less than drivers with a history of violations. Another key factor is your age. Generally, drivers with more experience behind the wheel pay less for coverage.
For drivers with a squeaky-clean record, rates should generally decrease as they rack up years of driving experience. If your rate hasn’t moved at all, even though your driving record has remained clean, it might be a sign you are overpaying.
You’ve never shopped around for better rates
Every car insurance company determines insurance premiums in a slightly different way. As a result, you might find significantly different rates across multiple insurance companies.
If you’ve never shopped around to compare rates, there’s a distinct possibility you’ve missed out on more affordable car insurance premiums with a different company.
You’re not receiving any discounts
Most car insurance companies offer customers discount opportunities. If you aren’t taking advantage of any car insurance discounts, you may be leaving money on the table.
“We’ve seen clients lower their premiums significantly by taking defensive driving courses and taking advantage of discounts for multiple policies,” says Rob Macoviak, president of Oyer, Macoviak and Associates, an insurance office in Boynton Beach, Florida. “Additionally, choosing vehicles with better safety records can also result in lower insurance rates.”
For example, bundling your home and auto insurance through the same insurer provides a discount. Other discounts are available for safe drivers, good students and professional groups.
Don’t hesitate to ask about any discounts you might qualify for.
Guide: How to get discounts on car insurance
Your life circumstances have changed
When life changes, your first thought might not be to update your car insurance policy. However, in some situations, tweaking your policy after a change in circumstances could lead to savings.
For example, let’s say you recently tied the knot. Generally, married drivers pay less for coverage than single drivers, to the tune of 8%, on average. Shopping for a new policy with that new status could help you tap into savings.
Factors that affect your car insurance rates
Your situation impacts your car insurance rates, and insurance companies also take more widespread market factors into account. Unfortunately, a combination of issues is pushing costs higher for most drivers.
Here’s a look at some of the factors impacting your costs:
- Driving record: Drivers with a clean driving record can expect to pay less for coverage.
- Inflation: Inflation is pushing the cost of repairing vehicles and medical bills higher. In turn, this leads to higher insurance premiums.
- Severe weather and related claims: Severe weather leads to car insurance claims, which pushes costs higher for insurance companies. Ultimately, this means car insurance costs rise.
- Credit scores: In most states, insurance companies can use a credit-based score to determine insurance rates. Generally, drivers with higher credit scores pay less for coverage.
- Coverage type: Drivers who opt for minimum coverage tend to pay less for car insurance. But after an accident, liability-only coverage won’t help you pay for repairs to your vehicle.
State-by-state car insurance rate comparison
Where you live has a big impact on your auto insurance costs. Drivers in some states can expect to pay significantly more for car insurance. In the United States, car insurance systems are categorized into two primary types: tort (at-fault) and no-fault states.
Tort states: Insurance premiums may be influenced by the potential for lawsuits and the need for higher liability coverage. However, rates can be lower if the legal environment is stable and claims are less frequent.
No-fault states: Premiums are generally higher due to mandatory personal injury protection (PIP) coverage, which increases the insurer’s risk exposure. The reduced ability to sue can also lead to higher premiums, as insurers bear more direct costs.
It’s important to note that while the type of insurance system influences rates, other factors, such as state regulations, healthcare costs, and accident frequency, also play significant roles in determining premiums.
For example, drivers in Louisiana, Florida and California pay the most for car insurance at annual rates of $2,883, $2,694 and $2,416, respectively. Drivers in New Hampshire and Maine pay closer to $1,200 per year.
Use the table below to find the average cost of car insurance in your state.
| State | Average annual premium |
|---|---|
| Alaska | $1,676 |
| Alabama | $1,860 |
| Arkansas | $1,957 |
| Arizona | $1,812 |
| California | $2,416 |
| Colorado | $2,337 |
| Connecticut | $1,725 |
| Washington, D.C. | $2,157 |
| Delaware | $2,063 |
| Florida | $2,694 |
| Georgia | $1,970 |
| Hawaii | $1,517 |
| Iowa | $1,630 |
| Idaho | $1,428 |
| Illinois | $1,532 |
| Indiana | $1,515 |
| Kansas | $1,900 |
| Kentucky | $2,228 |
| Louisiana | $2,883 |
| Massachusetts | $1,726 |
| Maryland | $1,746 |
| Maine | $1,175 |
| Michigan | $2,352 |
| Minnesota | $1,911 |
| Missouri | $1,982 |
| Mississippi | $2,008 |
| Montana | $2,193 |
| North Carolina | $1,741 |
| North Dakota | $1,665 |
| Nebraska | $1,902 |
| New Hampshire | $1,265 |
| New Jersey | $1,902 |
| New Mexico | $2,049 |
| Nevada | $2,060 |
| New York | $1,870 |
| Ohio | $1,417 |
| Oklahoma | $2,138 |
| Oregon | $1,678 |
| Pennsylvania | $1,872 |
| Rhode Island | $2,061 |
| South Carolina | $2,009 |
| South Dakota | $2,280 |
| Tennessee | $1,677 |
| Texas | $2,043 |
| Utah | $1,825 |
| Virginia | $1,469 |
| Vermont | $1,319 |
| Washington | $1,608 |
| Wisconsin | $1,664 |
| West Virginia | $2,005 |
| Wyoming | $1,758 |
How inflation is impacting your car insurance premium
“I’ve observed that inflation is impacting car insurance premiums by increasing overall costs,” Macoviak says. “Inflation raises the prices of repairs and medical services, which in turn leads to higher claims payouts and consequently higher premiums for drivers. This is particularly impactful in states like Florida, where repair and service costs tend to be higher due to the dense traffic and high accident rates.”
In addition to inflation, a spike in claims after destructive natural disasters has strained the insurance industry. Insurance companies pass along their increased expenses to drivers paying for coverage in the form of higher car insurance rates.
Car insurance rates are rising: Here’s what to do when car insurance rates increase
Ready to save? How to switch car insurance companies
Costs are rising, but that doesn’t mean you have to overpay for car insurance. When you compare quotes from multiple insurance companies, you’ll find the cheapest rates available for your situation. You can switch if you find a different company that offers cheaper rates.
Switching car insurance companies can be a straightforward process if approached methodically. Here’s a step-by-step guide to help you transition smoothly:
- Assess your current policy: Review your existing coverage, noting the types of protection, limits, deductibles and any discounts. This will serve as a benchmark when comparing new policies.
- Determine your coverage needs: Consider any changes in your circumstances, such as purchasing a new vehicle, moving or lifestyle adjustments, to ensure your new policy aligns with your current needs.
- Shop around for quotes: Obtain quotes from multiple insurers to compare rates and coverage options. Utilize online comparison tools and consult with insurance agents for a comprehensive view of the market.
- Research your top insurance company choices: Beyond price, evaluate potential insurers based on customer service, claims handling and financial stability. Reading customer reviews and checking ratings from independent agencies – like AM Best, J.D. Power and the National Association of Insurance Commissioners (NAIC) – can provide valuable insights.
- Confirm new policy details: Once you’ve selected a new insurer, ensure the policy details meet your requirements. Pay attention to coverage limits, deductibles and any exclusions or endorsements.
- Set the start date of your new policy: To prevent a lapse in coverage, arrange for your new policy to begin before or on the same day your current policy ends.
- Cancel your existing policy: After securing your new insurance, contact your current insurer to cancel your policy. Request written confirmation of the cancellation and inquire about any potential refunds for unused premiums. Make sure you don’t have a gap in coverage between the new policy starting and the old policy ending.
- Notify relevant parties: If applicable, inform your vehicle’s lienholder or leasing company of the change in insurance. Additionally, update your insurance information with your state’s Department of Motor Vehicles (DMV) if required.
By following these steps, you can switch car insurance companies effectively, ensuring continuous coverage and potentially securing better rates or services.
How modern gadgets can lower your car insurance premiums
Many insurance companies reward drivers who use modern safety gadgets to lower premiums. Below is a look at some of the ways to save.
Advanced safety features
You may pay less for car insurance if you choose to drive a vehicle with advanced safety features. After all, the safety features are designed to help you avoid an accident, which lowers the potential of filing a claim with the insurance company.
Here are a few safety feature discount averages:
- Airbags: 2%
- Anti-lock brakes: 3%
- Backup sensor: 4%
- Daytime running lights: 2%
- Driver alertness monitor: 2%
- Lane departure warning: 1%
- Rearview camera: 1%
The catch is that the latest safety features are often available in the newest vehicles. Generally, new vehicles increase the cost of car insurance coverage due to a higher value. After all, a more expensive vehicle is often more expensive to repair or replace after an accident. But your exact costs will vary from insurance company to insurance company.
Anti-theft devices
Many vehicles come equipped with anti-theft devices. If you drive a vehicle with anti-theft features, you might pay less for a full coverage car insurance policy, but it’s a small discount – only an average of 1%.
This discount will apply only to your comprehensive coverage, which is included in a full coverage policy and includes coverage for replacing a stolen vehicle.
Telematics devices
A telematics device allows an insurance company to monitor your driving habits. If you have safe driving habits, you’ll likely enjoy lower car insurance rates when you sign up for a telematics program – you can save an average of 10%.
Of course, the downside of a telematics device is that you could pay more for insurance coverage if you exhibit risky driving behaviors.
The bottom line
If you think you are paying too much for car insurance, it’s important to take action. Start by shopping around to see if you can find a better rate through a different insurance company. Additionally, don’t rule out discounts and raising your deductible as other ways to save on your premiums.
Resources & Methodology
Sources
- Insurance Information Institute “2023’s Severe Weather Events Are Proving Costly to U.S. Insurers.” Accessed December 2024.
- Insurance Information Institute “What determines the price of an auto insurance policy?” Accessed December 2024.
- Insurance Information Institute “How much auto coverage do I need?” Accessed December 2024.
Methodology
CarInsurance.com editors in 2024 collected rates from Quadrant Information Services for a 40-year-old driving a Honda Accord LX with a good insurance score and no violation on a clean driving record for a full coverage car insurance policy with limits 100/300/100 and $500 comprehensive and collision deductibles. The hypothetical driver has a 12-mile commute and 10,000 annual mileage. We analyzed 53,409,632 records, 34,588 ZIP codes and 170 insurance companies nationwide.
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Laura Longero
Executive Editor
Laura Longero is an insurance expert and Executive Editor at CarInsurance.com, where she specializes in helping consumers navigate the complexities of the financial and insurance industries. She has 15 years of experience educating people about finance and car insurance. Prior to joining CarInsurance.com, she worked as a reporter and editor at the USA Today Network. Her expertise provides readers with practical guidance, helping them make informed choices about their financial and insurance needs.
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John McCormick
Editorial Director
John is the editorial director for CarInsurance.com, Insurance.com and Insure.com. Before joining QuinStreet, John was a deputy editor at The Wall Street Journal and had been an editor and reporter at a number of other media outlets where he covered insurance, personal finance, and technology.
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Leslie Kasperowicz
Executive Editor
Leslie Kasperowicz is an insurance educator and content creation professional with nearly two decades of experience first directly in the insurance industry at Farmers Insurance and then as a writer, researcher, and educator for insurance shoppers writing for sites like ExpertInsuranceReviews.com and InsuranceHotline.com and managing content, now at CarInsurance.com.
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Nupur Gambhir
Managing Editor
Nupur Gambhir is a content editor and licensed life, health, and disability insurance expert. She has extensive experience bringing brands to life and has built award-nominated campaigns for travel and tech. Her insurance expertise has been featured in Bloomberg News, Forbes Advisor, CNET, Fortune, Slate, Real Simple, Lifehacker, The Financial Gym, and the end-of-life planning service.