How to estimate the cost of your car insurance

What determines your car insurance rate?

Auto insurance rates increased in 2023 and the trend is continuing into 2024. In many cases, you may see your car insurance rates going up due to big-picture economic forces. With increasingly complex car technology driving up repair costs and inflation causing medical bills to skyrocket, the cost to insure any vehicle is higher now than it was a year ago in most cases.

But within that big economic picture, it’s important to understand the individual factors in your risk profile that might cause an insurance company to charge you a higher or lower rate for coverage. When determining how to calculate your car insurance, these are some of the key factors that car insurance companies use to set premiums:

• Your driving record: The more accidents and traffic violations you have on your record, the higher your premium is likely to be. For example, a DUI may increase your premiums, and even a simple speeding ticket may mean more than a 20 percent rate increase. Similarly, if you are a newer driver without an established driving record, you will likely pay more than a more experienced driver with a clean driving record.
• Your location: Car insurance calculation rates vary by state and may even factor in your ZIP code, depending on your state’s insurance laws. The incidence of accidents, vehicle theft, vandalism and the severity of these claims in any given area could cause your insurance to be higher or lower. The area where you park your car — on the street or in a protected garage — can also make a difference in what you pay.
• Your age: Because younger drivers tend to have less experience behind the wheel, they are more likely to get into accidents than mature drivers. If you are under the age of 25, you will likely pay more for car insurance than someone older. Additionally, rates can begin to creep up again after age 70. However, Hawaii and Massachusetts prohibit the use of age as a rating factor.
• Your gender: Women are statistically less likely to get into serious traffic accidents than males. As a result, female drivers may pay lower car insurance premiums, especially among younger age groups. However, the following states prohibit gender as a rating factor: California, Hawaii, Massachusetts, Michigan, North Carolina and Pennsylvania.
• Your credit score: Your credit may impact your car insurance premium, depending on your state. Drivers with a low credit-based insurance score may be more likely to file claims than drivers with higher scores. As a result, insurance companies often charge more if you have a low credit score to compensate for the increased risk. The following states prohibit or restrict the use of credit as a rating factor: California, Hawaii, Michigan and Massachusetts. Note that additional states enforce some limitations around the use of credit as well; check your state’s laws to see how and whether it allows insurers to use credit as a rating factor.
• The type and amount of coverage you have selected: While you have to purchase at least your state’s minimum levels of coverage to drive legally, most insurance professionals recommend selecting higher limits or optional coverage types. Generally, increased coverage types and limits will increase your premium.
• The discounts you qualify for: Most car insurance companies offer discounts that might help you save money, like savings when you bundle your home and auto insurance together with the same company or a discount for signing up for paperless statements. Some discounts have more of an effect on your premium than others. Talking to your agent or company about possible discounts might help you maximize savings opportunities.
• The vehicle you drive: The make and model of the car you choose, along with its age and even its engine size, can also impact your cost of car insurance. The vehicle’s value, repair costs, safety ratings and theft risk are just a few factors that insurance companies use to determine rates.
• How much you use your car: The amount of time you spend on the road can impact your insurance premiums. If you spend a lot of time behind the wheel or drive long distances, you can expect to pay more than someone who drives more infrequently. Pay-per-mile or usage-based car insurance might help you save money if you don’t drive very often.
• Past claims: Filing a car insurance claim after an accident or other covered loss can cause your rates to go up.

It is important to remember that while each factor may play a role in determining how much you will pay for your policy, each insurer weighs each factor differently. Getting quotes from several companies might help you find the coverage you need at a competitive price.

How do coverage types affect your car insurance rate?

Car insurance policies are bundles of several types of coverage, and most of those coverage types can be purchased in varying limits. Generally, the more coverage you choose and the higher the limits, the more expensive your car insurance policy will be.

Minimum coverage

Every U.S. state except New Hampshire requires all drivers to purchase car insurance in order to legally drive. In most cases, state minimum coverage is “liability-only” insurance, which covers your financial responsibility for property damage or injuries you cause to others while driving. In some states, you may also need to purchase uninsured/underinsured motorist coverage, personal injury protection (PIP) or medical payments (MedPay) coverage. Minimum coverage is the cheapest type of auto insurance you can buy, but it doesn’t typically offer enough financial protection for the average driver.

Full coverage

You may also choose to purchase full coverage, which adds comprehensive and collision coverage to your policy. These auto insurance coverage types add financial protection for damage to your vehicle from a myriad of situations, including at-fault accidents, theft, vandalism, severe weather and hitting stationary objects — whereas minimum coverage insurance does not pay out for damages to your vehicle. If you have a loan or lease, you will likely have to purchase full coverage to protect the lender’s asset. Because you are adding additional coverage, your premium will generally be higher than if you purchased the minimum amount available.

Optional coverage

Finally, some coverage types are generally optional. Optional coverage can help address your individual circumstances. Do you have an unreliable vehicle? You may want to consider roadside assistance. Do you lease or finance your vehicle? You may want to purchase gap insurance, which pays the difference between what you owe on your new vehicle and its current value should it be stolen or totaled in a covered accident.

Uninsured and underinsured motorist coverage may be required by your state, but are usually optional and add coverage for your injuries and possibly the damage to your vehicle if you are hit by someone who does not have any insurance or does not have enough coverage to pay for your damages. Other optional coverage types include car rental coverage, new car replacement or ridesharing coverage. Every company will offer a different range of optional coverage types.

How to calculate car insurance costs

A good starting point for figuring out how to calculate car insurance estimates is to review the average cost of car insurance in your state. That may give you a general idea of how much a policy costs in your area. From there, you may be able to put together an estimate for yourself by considering the following:

• Decide how much insurance you need: Before shopping for coverage, it’s helpful to know how much coverage you need and what optional coverage types you are considering. If you are unsure how to figure this out, you may want to talk to an agent in your area.
• Think about your individual circumstances: If you have a teen driver to insure, have one or more accidents or tickets on your record, have a DUI conviction or live in an area where car crashes are common, you should probably expect to pay more for insurance than drivers without these factors. Understanding your rating factors might help you search for companies geared toward drivers like you.
• Know what discounts you can take advantage of: If you have a home and auto policy, getting quotes from companies with multi-policy discounts could be a good move. If you have a teen driver, looking for a company with numerous teen driver discounts might help you save.

After taking each of these factors into account, you can use a car insurance calculator to begin requesting quotes and comparing insurers — or, if you’re happy with your current provider, you can adjust your budget to account for any anticipated rate increases. Quotes are not exact, but they may serve as a car insurance estimator to get an idea of how much you’ll pay. To get a better idea of what you’ll actually pay, try to submit as much detailed information as possible when requesting quotes. A licensed insurance professional can help you finalize rates after you get your quote.

Factors to consider when comparing quotes

When comparing car insurance quotes, keep in mind that you’re looking at more than just prices and consider these factors when comparing insurance offers:

• Coverage limits and types: To get a clear comparison, you’ll likely want to make sure your quotes are for similar coverage types and limits across the different carriers you’re considering. This includes any endorsements you’ve selected. If you are buying coverage for your vehicle, you will likely want to check that your deductibles for comprehensive and collision are the same when comparing the options.
• Discounts: Consider asking about what discount opportunities are available with each insurer and which ones you might qualify for. Keep in mind that even though one company might offer more auto insurance discounts, it’s more impactful to know how the discounts affect the final premium to see which policy is cheaper.
• Customer satisfaction and financial strength ratings: Most of the major insurance companies are rated by agencies like AM Best for financial strength and J.D. Power for customer satisfaction. These scores and ratings may be important for ensuring you are working with a company that will payout claims and prioritize customer experience.
• Policy management features: If you’d like to be able to manage your car insurance online or through a mobile app, this could be another consideration. You may also check a company’s customer service hours, especially if you work odd hours.

Frequently asked questions