Every driver needs auto insurance. It’s simply the law, and every state (except for New Hampshire technically) requires anyone who gets behind the wheel to have a fairly broad level of coverage.
As you shop around for a policy, chances are that every provider will be quick to let you know exactly what you need — at a minimum — in your location. Still, it pays to come to the table with your own knowledge, and resources like the Insurance Information Institute offer great breakdowns of the types of auto insurance available.
That said, let’s be honest. You are mostly concerned with how much you’ll have to pay. That final bottom-line number — along with getting the best policy possible for your money — is what it all comes down to.
But how do insurance companies determine how much you’ll pay? What type of rate can you personally expect to get?
While various factors will always be weighed as you’re rate is calculated, the following four will all have a big role to play.
1. Auto Insurance Rates and Age
Because insurers base rates on demographics, younger people will typically pay more for their policies. All things being equal, you will pay the most in your teen years and see that cost drop over time. As you age and gain more experience, you will join lower-risk groups. But while most 18-year-olds will inevitably pay more than the average 50-year-old with an unblemished driving history, there are ways to differentiate yourself. Students, especially those with a good academic track record, can often be rewarded with lower rates, for example.
2. Auto Insurance Rates and Location
Different places have different rates. Some of this comes down to state rules and regulations, while part of it is about risk profiles for the area, traffic conditions, and even factors like weather. Drivers in Miami, as you can imagine, tend to have more accidents than people living in rural Montana. Population density doesn’t solely define the difference though. Some smaller cities have worse road conditions than bigger ones. And you may not always be able to guess which states (like Michigan, Kentucky, and Louisiana) tend to have higher rates or the others that don’t. According to U.S. News & World Report, Maine is the cheapest followed by New Hampshire, Idaho, Ohio, and Wisconsin.
3. Rates and Driving History
Your driving history understandably can play an out-sized role in your auto insurance rate. If you have never had so much as a speeding ticket or a fender bender, you will likely get the best deal. Some minor incidents likely won’t impact you at all either, but major accidents with multiple claims, as well as severe and recurring traffic violations, like DWIs or hit-and-run charges, will see you paying significantly more. As a rule, the cleaner your record, the less you will pay.
4. Auto Insurance Rates and Savings
Of course, age, location, and driving history don’t determine everything. Like with students, there are savings that can be realized for homeowners and married drivers. And some people may be eligible for policies through preferred providers. Military families, for example, can benefit by obtaining auto insurance coverage through USAA for fair rates — the lowest on the market in some cases, per U.S. News & World Report — that aren’t always available on the wider market. You can also often realize savings on multi-vehicle policies.
Getting the Best Auto Insurance Coverage
The auto insurance market is relatively straight forward. The age aspect typically annoys younger drivers and the varying prices by location can be a bit baffling. But most of the other risk factors tend to make sense, and understanding them will help you predict what type of rate is likely in store for you.
More than anything, you should recognize that coverage is very important — and mandatory — so it pays to be as proactive as possible when it comes to protecting yourself and your family. Lastly, be sure to take advantage of any discounts and savings you can find. That way, you will be able to stay secure without breaking the bank.