On average, Americans spend roughly $1,655 a year on car insurance alone. That means they are spending about $138 a month. However, this is just the average. That means there are Americans that are paying more than this. Overpaying on car insurance is costing Americans $21 billion a year! That is why it is important for Americans to know different ways that they can save on car insurance costs.
Your Guide to Car Insurance
Before you can learn how you can lower your car insurance rate, you want to make sure you have a clear understanding of car insurance. Having some level of car insurance is a law in all states except for Virginia and New Hampshire. That’s why having coverage is necessary for most people. However, when people buy car insurance, they may not do it the way that’s best.
The best way to shop for car insurance involves comparing your options. You don’t want to just blindly choose the first offer you get. What if you could get the same coverage but for a lower price? Exactly. That’s why there’s factors to keep in mind like:
- Your Location
- Personal Information
- Your Driving Habits
- Car Information
Your Location
Your location is an important factor in determining how much you’ll need to pay for car insurance. In fact, on average, every year, the cost of car insurance varies by $4,004 depending on the state that you get insurance in. Michigan has the highest rates (surprising, right?) while Iowa has the lowest rates.
Personal Information
Your age and gender will play a role in your premiums! Some people think it’s descrimination but that’s not the case. It’s all based on statistics. On average, men will pay 12% more than women. Also a good rule of thumb is to keep in mind that the younger the driver, then the higher the premium. For example, on average a 16 year old will have an annual premium of $6,777 compared to a 55 year old that has an annual premium of $1,690.
Besides your age and gender, your credit score will impact your car insurance premium. Depending on the company you choose, car insurance companies will consider your credit score when determining your car insurance premium.
Your Driving Habits
Another important part to consider is your driving habits. If you have a history of driving long distances, have DUIs, or have a history of getting into car accidents then you likely pay more compared to another driver that has a clean record. That’s because you pose more of a risk to the insurer!
Car Information
The type of car you have and the year of your car plays a role in your car premiums. Think about it like this, a 2010 Chevy Impala will cost less than a 2017 BMW 320xi. That’s because more expensive cars will result in a more expensive payout if insurance needs to make a payment. That is why this factor can affect car insurance premiums.
Cheap Car Insurance Companies
Besides understanding the factors that impact your car insurance premiums, the company you choose almost matters. There are some car insurance companies that offer competitive rates. That’s why some of the cheapest car insurance companies are:
- USAA
- Geico
- State Farm
USAA
If you have a clean driving record, then USAA provides super competitive low rates. Besides offering low rates, they have high ratings from consumers. However, USAA can be hard to get because it can only be provided to qualifying veterans or the family of those veterans.
Geico
Another cheap option is Geico. They are known for their gecko mascot in the commercials, but they actually can provide competitively low rates as well. This is especially a good option for drivers with poor credit and even teen drivers.
State Farm
Not everyone has a clean driving record. That is why people need to be realistic when comparing car insurance companies. One of the cheapest companies for drivers that have a less than ideal driving record is State Farm. In fact, according to a study conducted by U.S. News, they provide the lowest average cost of car insurance to drivers after getting a DUI, speeding ticket, or record.
How to Save $714 on Car Insurance
Let’s look at an example on how drivers could save $714 a year just by switching car insurance companies. Many Americans deal with a poor credit score. In fact, 16% of Americans have a poor credit score between 300 to 579. Having a poor credit score can raise rates by more than you may realize. The average rate for car insurance of a driver with poor credit is $2,524 every year. However, by getting insurance through Geico the average rate for a driver with poor credit is $1,810 every year. That means they can save $714 every year just by choosing the right car insurance company! That should show you just how important it is to compare companies before you choose which one to get car insurance from.
Frequently Asked Questions
When learning about car insurance premiums, people can be confused or have questions. If you are in the same boat then you’re not alone! In fact, there are some frequently asked questions that may be able to provide even more information about car insurance.
What are the Different Car Insurance Parts?
It’s important to keep in mind that the law will impact the type of car insurance coverage you need. However, you can typically expect to see six different parts of car insurance which are:
- Collision
- Liability
- Comprehensive
- Personal Injury Protection (PIP)
- Uninsured/underinsured Motorist
- Medical Payments (MedPay)
What is the Best Insurance Company if You Have a DUI?
Besides having poor credit, other factors to consider include previous marks on your driving record like a DUI. That can make your car insurance premium more expensive which is another reason why it’s especially important to compare car insurance companies. If you have a DUI on your record then the cheapest car insurance company would be State Farm because on average drivers can save $609 a year!
Bottom Line
Finding the right car insurance can be a daunting task but it doesn’t have to be. Comparing car insurance companies while being mindful of factors that impact car insurance premiums can help you find the best rate. For example, on average if you have a poor credit score you could save $714 by choosing Geico! Take your time when comparing options and you may be able to save hundreds every year.
