(Updated on October 28, 2019)
Car insurance costs tend to fluctuate based on a variety of factors. Things like age, driving history, education, credit score, zip code, and car model will all play a role in the insurance company’s determination of what your monthly or yearly car insurance premium is going to be. The insurance company will also look at whether you own your vehicle or not.
When you see insurance advertisements which show you some cheap monthly rates, do not take them at face value. You’ll only qualify for these cheap rates if those factors check out. This means you need a good credit score, standard car model (not luxury), a college degree, good driving history, and you must reside in a decent zip code with a low crime rate.
The cost of car insurance is rising each year for other reasons too. Inflation has increased the prices of just about everything, ranging from car parts to mechanic labor costs. This means that if an insured vehicle suffers an accident, it will cost the insurance company more money to repair it. As a result, insurance companies tend to raise the price of the premiums for their policyholders.
Let’s look at the average monthly and yearly car insurance costs.
Monthly Car Insurance Cost
The average monthly car insurance cost for an American is $120. This comes out to around $720 every 6 months. This is a very rough estimate and it does not determine how much coverage each driver has elected to receive.
For most Americans, they typically choose enough coverage to match their net worth. That way, if they’re ever sued by another driver, their total assets are protected by their insurance coverage.
As for low-income Americans with little to no net worth, they’ll simply choose the minimum required coverage allowed by their state for comprehensive, liability, and collision. A driver with a good driving record with minimal coverage may be able to get their monthly rate to under $100.
Yearly Car Insurance Cost
The average yearly car insurance cost for an American is $1,300. This is the equivalent to about 3 or 4-months’ worth of car payments.
Many insurance companies charge their drivers every month, but sometimes you can choose to pay every 6 months or 1 year. This may entitle you to a discount on the total price of your coverage for that policy period if you pay more upfront.
Check out the deals offered by various insurance companies to see if they allow this.
- Can You Get Car Insurance without a License?
- Cheapest Car Insurance for Low-Income Families
- Top 7 Best Car Insurance Companies for Bad Credit in US
Ways to Lower Your Premium Costs
If you cannot get a low premium, do not worry because you can work toward getting a lower one. Insurance companies regularly monitor your driving status and living situation to determine what your premium rate should be. That is why your premium rate tends to change every new policy period.
For some people, their rates go up, while for others they go down. Obviously, maintaining a good driving record and avoiding accidents for a few years will certainly help you get lower rates. It may even get you accident forgiveness too. This is where the insurance company won’t raise your rates after the first accident.
If you’re making payments on your car, then insurance companies will charge you a higher rate. But once your car is paid off, your rates will lower because you won’t be required to have as much collision or comprehensive coverage anymore.
Also, keep your credit score in a healthy range because insurance companies see this as a sign that you’re trustworthy. If you’ve paid off your car, then your credit score should increase anyway at the end of the loan term. Any credit score above 650 is fine.