December 9, 2017

Average Cost of Car Insurance May Surprise You

Read more about How to Save Money

It's not unusual to spend $1,000 - $4,000 per year on car insurance. Young drivers and poor driving records tend to send the prices soaring.

Read this shocking study to learn about the average car insurance costs and how you can minimize them.

© Ethan (CC BY 2.0) via Flickr

Average Car Insurance Costs

  • What is the average cost of car insurance?
    On average, drivers spend $982 per year on car insurance. That's about an 8% increase over the previous 5-year figure.

    Note: Actual figures vary based on the type of coverage chosen. For example, certain states require full coverage, while others only require liability insurance.

    Find Affordable Car Insurance

  • What is the average cost of car insurance per month?
    On a monthly basis, the average driver pays $82 for car insurance. This is a 4% increase from the prior year.

  • What is the average cost of car insurance for a 16-year-old?
    16-year-olds have very little driving experience. This results in higher premiums in most cases. The average car insurance premium increases 152% with the addition of a 16-year-old driver. This brings the average car insurance premium to $2,474.

    This is adding a 16-year-old to your policy. Giving a new driver their own policy results in a premium. It could cost more than double the premium of a teen on a parent's policy.

  • What is the average cost of car insurance for an 18-year-old?
    Teens and young adults can remain on their parent's car insurance until they are 26 years old. If you choose to get your own policy, expect to pay an average of $4,000 per year for that policy.

  • What is the average cost of car insurance for a 20-year-old?
    Even though insurance agencies still view 20-year-olds as risky, their premiums decrease a bit. 20-year-olds pay an average of $2,800 per year. This is likely due to the few years of experience they have driving. However, a bad driving record can send that average sky high quickly.

  • Which state has the highest average liability insurance premiums?
    If you live in New Jersey, you pay the highest liability insurance premiums. New Jersey has always had premiums as much as 50% more than the nation's average. According to Marshall McKnight from the Department of Banking and Insurance, New Jersey has the densest population. This means more cars and more crashes. He also noted that many drivers carry more insurance than is legally required. This forces the state's average up higher.

  • Which state has the lowest average liability insurance premiums?
    Iowans luck out with the lowest average liability insurance premiums in the nation. They pay an average of $295 per year for liability insurance. This is 44% lower than the national average for liability insurance.

  • Which state has the highest combined insurance premiums?
    New Jersey, the state with the densest population, also has the highest combined insurance premiums. New Jersey residents pay an average of 46% more than the nation's average, paying $1,264 per year.

  • Which state has the lowest combined insurance premiums?
    Residents of Idaho luck out with the lowest average insurance premiums. At $572 per year, they pay around 33% less than the nation average.

Shopping for Car Insurance

  • How often do drivers change auto insurance?
    Even though it's easy to shop for car insurance, the average American stays with the same carrier for 12 years. Even more surprising, 14% of Americans kept the same carrier for 20 - 30 years.

  • What percent of drivers check annually to see if they could save money on their car insurance?
    Only about 16% of drivers check to see if they are eligible for any new discounts on their car insurance. A few key life events that may qualify you for lower rates include:

    • Short daily commutes (less than 5,000 miles per year)
    • Marriage
    • Working in specific industries
    • Paying renewal premiums early

    These discounts are not automatic. The driver must alert their agent of their eligibility in order to get the discount.

  • What are the top reasons drivers don't shop for cheaper auto insurance?
    The largest reason for not shopping around for cheaper auto insurance is time. More than 50% of Americans don't have the time to shop around. Just over 40% also believe the process is too complicated.

How to Save on Car Insurance

  • How much do policyholders save on average when bundling car and home insurance?
    Many insurance companies offer savings when you carry more than one policy with them. The most common is bundling homeowners insurance and car insurance. The average savings is around $295 per year.

  • How does bundling insurance save you money?
    Insurance companies save money when you bundle your insurance. They have fewer administration costs because all of your personal information is the same. Past buying history also shows that many clients who have two types of insurance with a company often buy a third policy. This furthers the sales efforts of the company with few expenditures.

  • Which state offers the highest discount for bundling insurance?
    Every state has different insurance rates. The largest savings are often seen in Georgia and Oklahoma, both of which offer an average 22% savings for bundled insurance.

  • Which state offers the lowest discount for bundling insurance?
    Florida offers the smallest benefit for insurance bundling. They offer their customers an average of an 8% savings. New York is a close second with just an 11% savings.

Teens and Car Insurance

  • What is the average insurance premium increase when adding a female teen driver?
    Adding a female teen driver to your policy usually results in a lower premium increase. On average, girls raise your insurance premium 129%. The death rate for motor vehicle accidents for males is double that of females. This could contribute to the lower premium increase for females.

  • What is the average insurance premium increase when adding a male teen driver?
    Teenage boys increase the average insurance bill by as much as 176%. This is just about 50% higher than the premium increases for a teenage girl.

  • How can you keep your insurance rates down with a teen driver?
    Luckily, there are ways to keep your insurance rates down even with a teen driver:

    • Encourage them to keep their grades up - a B average or higher can lower your premiums
    • Provide a safe and "older" model car
    • Increase your deductible
    • Don't list your teen driver as the "primary driver" (if you are the primary driver)

Reasons Car Insurance Increases

  • How much does car insurance increase after an accident?
    The Insurance Services Office recommends an increase of 20 to 40% of the base rate in the state after an accident. The state's base rate is the average rate before any discounts are applied. If you have a one-car policy, your rate will increase 40%. If you have more than one car on the policy, the premium will increase 20% for the first two cars.

  • How much does car insurance increase after a traffic violation?
    If there's any incentive to follow the law and avoid speeding, it could be the 22% increase your premiums could experience with just one ticket. This is just the average. The actual increase depends on the violation and where you live. It's not unheard of to see over a 100% increase in your premium.

  • What traffic violations don't affect car insurance premiums?
    Non-moving violations typically don't affect car insurance rates. Parking and seatbelt tickets are the most common. Texting while driving may affect your rates in some states. It depends if it's considered a moving violation in your state.

  • How long are premiums affected by a traffic violation?
    Simple violations, such as a minor speeding ticket, may only affect your rates for 3 years. However, major violations, such as a DUI, could affect your rates as long as 10 years.

Bottom Line

Good grades, a good driving record, and a safe car are the best ways to keep your car insurance rates down. The key, however, is to shop around. Don't get comfortable with your premium. Before you know it, you'll be paying hundreds of dollars more each month without even realizing it.

Sources and References:

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