Car insurance is a type of insurance policy that helps protect individuals and their vehicles from financial loss in the event of an accident, theft, or other damage. Car insurance has different pricing, so individuals need to understand how car insurance coverage costs are calculated so that they make informed decisions about their insurance coverage. Several types of car insurance coverage are available, including liability, collision, comprehensive, and medical coverage.
The main factors that are considered when calculating car insurance coverage costs include:
The make and model of the car
The individual's driving record
The location where the car is parked at night
The main methodology for calculating car insurance coverage costs is risk assessment, which insurance companies use to determine the likelihood of an individual filing a claim and how much that claim is likely to cost. The minimum price for car insurance coverage costs varies by state. Most states have minimum coverage requirements for car insurance. Individuals need to check the car insurance requirements in their state and choose a policy that meets their individual needs.
Table of contents
- How to calculate car insurance coverage
- What are car insurance cost factors?
- What are possible car insurance costs for bodily injury liability?
- What are possible car insurance costs for property damage liability?
- What are possible car insurance costs for uninsured/underinsured motorist bodily injury?
- What are possible car insurance costs for rental car coverage?
- What are possible car insurance costs for comprehensive and collision?
- How to compare different car insurance companies' coverage costs
- How to get the cheapest car insurance
- How to estimate car insurance cost for high-end models
- How does the term of car insurance affect the cost?
- How does a driving record affect the cost of car insurance?
- What to know for estimating car insurance coverage cost
How to calculate car insurance coverage
Insurance companies consider several factors when calculating car insurance coverage, including the desired type of coverage, the value of the car, and the level of risk the individual is willing to take on. Follow the steps below to calculate car insurance coverage:
Identify the necessary coverage type. Car insurance includes liability, collision, and comprehensive coverage. Liability coverage helps financially protect the individual if they are at fault in an accident and cause someone to be injured or damage someone else's property. Collision coverage covers the cost of repairing the individual's vehicle in the event of a car accident. Comprehensive coverage covers damages to the car from non-collision related incidents, such as theft or natural disasters. Collision and comprehensive are optional coverages, while liability is required in most states.
Determine the car's value. If you plan to purchase comprehensive or collision coverage, the car's value is an important factor in calculating car insurance coverage. The value helps determine the amount of coverage necessary to adequately cover the expenses of repairs or replacement of the vehicle if totaled in an accident.
Consider the deductible. The deductible is the amount you must pay out of pocket before insurance coverage begins to pay. A higher deductible lowers the premium, but you’ll have to pay more out of pocket if you need to file a claim.
Shop around and compare quotes. You should start shopping around and comparing quotes from different insurance companies once you’ve determined the necessary type of coverage, car value, and your deductible preferences. Compare each policy's coverage limits, deductibles, and premium costs to find the best quote that meets your needs and budget.
Make the purchase. Purchase the insurance once you’ve found the insurance policy you want. You can make any necessary updates to your policy later if your circumstances change.
Several myths and misunderstandings surround the possible costs of car insurance. One common myth is that red cars are more expensive to insure than cars of other colors. The color of a car has no impact on insurance costs. Another myth is that newer cars are always more expensive to insure than older models. Some newer cars may have advanced safety features that qualify them for lower insurance rates.
Some people believe their credit score has no bearing on their insurance cost, but that’s not true in many cases. Insurance companies often use credit scores as a factor in determining premiums. The current average cost of full-coverage car insurance is $3,546 per year, according to Insurify real-time data, while the average cost of minimum coverage is $2,362 per year. If average insurance rates increase 7% by the end of 2023, as projected in Insurify’s Auto Insurance Trends Report, full-coverage costs would rise to $3,794 per year, and the cost of minimum coverage would be $2,527 per year.
What is the formula for car insurance calculation?
Many factors influence the formula used to calculate a car insurance rate, including the policyholder's age, gender, marital status, location, driving history, state regulations, coverage limits, and the type of vehicle they drive. This unique combination of factors is calculated to generate a risk profile, with each insurance company using a slightly different formula.
For example, let's examine a 25-year-old single male living in a large city with a good driving record. This driver has a newer model sedan and wants a policy with liability coverage limits of 100/300/50. This means he wants to purchase $100,000 of bodily injury liability coverage per person, per accident, $300,000 of bodily injury liability for all persons in one accident, and $50,000 of property damage coverage.
The insurance company starts by determining the base premium, calculated on the average cost of insuring this type of car in this location, which is set at $1,000 per year. The company then considers personal factors such as age and gender, which increase the base premium by 25%, bringing it to $1,250 per year. The coverage limits chosen affect the premium, with higher limits potentially increasing it by $250 to $1,500 per year. Any applicable discounts, such as a good driving record or defensive driving course, are applied last, and reduce the premium by 10% to $1,350 per year.
The final premium for your individual policy will depend on your unique factors and will differ from this example.
What are common car insurance calculation mistakes?
People make several common mistakes when calculating their car insurance premiums:
Underestimating car value: It’s important to accurately estimate the value of your car to ensure sufficient coverage in the event of an accident. You can’t have sufficient coverage if you’ve underestimated the value of your vehicle.
Not accurately disclosing age and driving history: Age and driving history can have a substantial impact on the price of the policy. If your insurer discovers you provided false information after an accident, you could lose coverage. This is known as “soft fraud” and may result in an insurance company not having to honor the policy if a claim is made based on false pretences. Insurance companies consider all drivers' age and driving history when determining premiums. Younger and less experienced drivers are generally considered higher risk, and therefore are charged higher premiums.
Not comparing quotes from multiple insurers: If you only get a quote from one insurance company rather than comparing quotes from several different insurers, you could be missing out on a better rate.
Failing to disclose all relevant information to the insurance company: It’s important to be truthful and accurate when providing information to the insurance company, as it affects the calculation of premiums.
Not fully understanding the coverage limits of policies: Policyholders need to choose coverage limits that adequately protect their assets. If your coverage limits are too low, you won’t have enough protection in the event of a major accident or loss. If your coverage limits are too high, you’ll pay additional unnecessary premiums.
Not considering additional coverage options: Many additional coverage options are available for you to add to a car insurance policy. Roadside assistance or rental car reimbursement can come in handy if your car breaks down on the road, or you need transportation while your car is being repaired following a covered event. Consider the options and their costs when calculating premiums to decide on the best option.
What are car insurance cost factors?
Many factors affect the cost of car insurance. Some of the most common include:
Type of vehicle: The factors influencing the cost of insurance premiums for a vehicle include its make, model, and age. For instance, sports cars and luxury vehicles have higher insurance premiums due to their higher repair costs and the increased possibility of accidents or theft.
Driving record: Your driving history affects the amount you pay for car insurance premiums. If you have a history of accidents or traffic violations, you’re considered a higher risk and therefore will be required to pay higher premiums.
Age and gender: Your age and gender affect your car insurance premiums. Generally, younger drivers and males are seen as a higher risk and have higher premiums.
Location: Where you live affects your car insurance premiums. For example, if you live in a densely populated area with a high crime rate, you’ll likely pay higher premiums due to the increased risk of theft and damage to your vehicle.
Coverage levels: Your choice of coverage affects your premiums. You’ll pay higher premiums if you select higher levels of coverage, such as collision and comprehensive coverage.
Deductible: The deductible is the amount you must pay out of pocket before your insurance begins to pay for a covered event. Higher deductibles result in lower premiums, but you need to choose a deductible that you’re able to afford to pay in the event of an accident.
How to calculate car insurance costs for different U.S. states
Most states require drivers to carry at least a minimum amount of liability insurance — only New Hampshire doesn’t. Additionally, some states mandate personal injury protection (PIP) insurance. Calculating how much car insurance you need in a given state starts with understanding that state’s car insurance requirements. Once you have that information, you’ll want to take the following steps:
Determine the type of coverage needed.
Research various insurance providers.
The type of coverage required depends on your personal circumstances, such as your car's value, your financial situation, and the state where you live. You can research different insurance providers by requesting quotes from multiple companies or using an online comparison tool. Be sure to research discounts that might be available, such as discounts for insuring multiple vehicles with one company, having a good driving record, or having safety features on the car.
While it’s a good idea to compare quotes to find the best coverage at the most affordable price, it’s also important to remember that the cheapest option is not always the best for your individual circumstances. You can buy insurance online or by contacting the insurance company directly once you’ve determined which policy is right for you. After you’ve bought a policy, it’s important to store a copy of the policy documents in a safe place in case you need them to file a claim.
Several factors influence the pricing of car insurance costs in different states, including:
Cost of living
Insurance industry competition
State laws and regulations governing car insurance minimum coverages
Additionally, states with higher accident rates or population densities have higher insurance premiums due to the increased likelihood of claims being filed. The cost of living in a particular state and competition in the insurance industry affect the cost of car insurance. Overall, many factors contribute to the variability of car insurance costs from state to state in the U.S.
The states with the highest car insurance premiums are Florida, Louisiana, Delaware, Michigan, California, Kentucky, Missouri, Nevada, New York, and Nebraska. Factors that drive up the costs of vehicle insurance in these states include severe weather, high population density, many uninsured drivers, and expensive lawsuits.
Residents of Ohio, Maine, Idaho, Vermont, Oregon, Indiana, Hawaii, New Hampshire, Iowa, and Virginia currently have the lowest car insurance rates in the country. In these states, insurers are able to offer relatively affordable prices for their residents, despite the nationwide increase in car insurance rates.
The following table shows the range of average monthly premiums by state.
|State||Minimum Coverage Cost||Maximum Coverage Cost|
The impact of home and assets on car insurance costs
Owning a home and having other assets can affect the cost of car insurance in a couple ways.
Homeownership: Insurance companies offer discounts to homeowners because they consider them more financially stable, which lowers their risk profile. Many insurance companies also offer discounts for bundling car insurance with home insurance.
Value of assets: When calculating how much coverage you need, you should consider your total assets. Your home value and the value of other assets you need to protect will affect the amount of car insurance coverage you need. If you don’t have sufficient coverage and a judgment is awarded against you, your assets could be at risk.
Overall, you’ll need to consider your home and other valuable assets when calculating how much insurance coverage you need.
The calculation of insurance coverage cost based on car ownership
Insurance coverage cost calculations are rooted in the principle of risk assessment. Insurance companies assess the risk of providing coverage to a particular individual or group based on various factors, including the type of car.
Cars that are more expensive or have higher performance capabilities are generally considered riskier to insure because they are more likely to be involved in accidents or stolen. Older cars with lower performance capabilities generally are less risky to insure.
Insurance companies consider the driving history of the car owner and the primary drivers when calculating insurance coverage costs. Drivers with a history of accidents or traffic violations are considered higher risk and are charged higher premiums. Overall, the calculation of insurance coverage cost based on car ownership is an attempt by insurance companies to accurately assess the risk of providing coverage to a particular individual or group, and to charge premiums that accurately reflect that risk.
How does a vehicle's worth affect car insurance cost estimation?
A car's value is one factor affecting car insurance costs. Insurance costs more for expensive cars because they are more costly to repair or replace. For example, a high-end sports car costs more to insure than a basic economy car because it’s more expensive to repair or replace. The driver's age, the location where the car is driven and parked, and the driver’s history of accidents or traffic violations are other factors affecting car insurance costs. The amount of coverage you choose and the deductible you select also affect the cost of car insurance.
Does having a backup car change car insurance cost if your car is totaled?
Having a backup car may allow you to forgo car insurance add ons like rental car coverage. While this coverage is generally an additional cost, the amount is usually nominal, so skipping it won’t save you that much money.
On the other hand, if you have a backup car, you’ll also need to insure it — which will increase your overall insurance costs. If you put it on the same policy as your regular ride, you may be able to take advantage of a multi-car discount. If you’re thinking of adding a backup car to your household, contact your insurance company with the make and model to get an idea of how the vehicle might affect your insurance costs.
Does ridesharing a car affect car insurance prices?
Most personal car insurance policies won’t cover ridesharing as a standard part of the policy. Instead, most insurance providers require an endorsement or additional coverage for ridesharing. The endorsement or separate policy will come with an additional expense.
If you’re considering becoming a rideshare driver, check with your car insurance company to determine how your policy covers you when participating in ridesharing. You should compare car insurance quotes from various companies to ensure you obtain suitable coverage.
What are possible car insurance costs for bodily injury liability?
If you’re found at fault for an accident that causes injuries to another driver or passenger, bodily injury liability insurance helps pay for their medical expenses and lost wages. It also can cover your legal expenses if the other party decides to sue you. The coverage is typically expressed in terms of "per person" and "per accident" limits. For example, suppose the policyholder has a policy with limits of $50,000 per person and $100,000 per accident; the insurance company pays up to $50,000 for any one person's injuries and up to a total of $100,000 for all injuries sustained in the accident.
The cost of bodily injury liability coverage varies widely, and depends on factors such as the limits of coverage chosen, the insurance company, and the policyholder's risk profile (such as their driving record and the type of car they drive).
Here are some estimates for the cost of bodily injury liability coverage from a few different insurance companies:
Allstate: $150 to $300 per year for $50,000/$100,000 in coverage
GEICO: $50 to $100 per year for $50,000/$100,000 in coverage
State Farm: $100 to $200 per year for $50,000/$100,000 in coverage
Note that these are just estimates, and the actual cost is higher or lower depending on specific circumstances. It’s always a good idea to shop around and compare quotes from multiple insurance companies before deciding.
What are possible car insurance costs for property damage liability?
Property damage liability insurance pays for damages you cause to someone else's property while you’re driving. It includes damages to another vehicle, a fence, a building, or other types of property.
The cost of property damage liability coverage varies greatly depending on the insurance company, the state in which one lives, and the type of vehicle being insured. Generally, expect to pay anywhere from a few hundred dollars to over a thousand dollars per year for property damage liability coverage per vehicle.
Some estimates for property damage liability coverage from major insurance companies include:
Allstate: $400 to $800 per year per vehicle
Geico: $500 to $900 per year per vehicle
State Farm: $300 to $700 per year per vehicle
It’s important to remember that these are only possible estimates and that actual car insurance costs for property damage liability coverage may be higher or lower depending on various circumstances. Getting quotes from multiple insurance companies will help you find the right coverage.
What are possible car insurance costs for uninsured/underinsured motorist bodily injury?
Uninsured/underinsured motorist bodily injury (UM/UIM) coverage is a type of car insurance that helps protect you if you’re injured in an accident caused by a driver who doesn’t have insurance or does not have enough insurance to cover your injuries sustained in the accident.
UM/UIM coverage typically covers medical expenses, lost wages, and other damages from the accident up to the policy's limits. The cost of UM/UIM coverage varies widely depending on various factors, including the insurance company, location, type of vehicle driven, and personal characteristics (such as age, driving history, and credit score).
Generally, UM/UIM coverage tends to be more expensive for drivers who live in urban areas, drive high-value vehicles, or have a history of accidents or traffic violations. For example, here are some possible UM/UIM coverage costs for a 45-year-old driver with a clean driving record living in a mid-sized city:
Allstate: $40 per year per person/$80 per year per accident
Progressive: $30 per year per person/$60 per year per accident
State Farm: $50 per year per person/$100 per year per accident
These are just rough estimates, and actual UM/UIM coverage costs vary based on specific circumstances. You should always shop around and compare quotes from multiple insurance companies to find the best coverage.
What are possible car insurance costs for rental car coverage?
Your auto insurance policy generally includes rental car coverage if you have collision and comprehensive insurance. The amount of protection will depend upon the limits you carry, as it usually provides the same protection for vehicle damage in an accident for a rental car as it does for your personal vehicle. Your liability kicks in when you take the wheel.
The price of these coverages is different for everyone. If you don’t carry those kinds of insurance, or have a high deductible, buying rental car insurance would be wise. Over-the-counter policies from car rental agencies usually have no or a very low deductible.
Some credit card companies also offer free rental car insurance or for a lower cost to card holders.
Car rental coverage is different from rental reimbursement. Rental reimbursement is an optional insurance that you’re able to add to your policy. It does cost extra, but it's relatively inexpensive. This coverage covers the fee for a rental car while your vehicle is in for repair.
What are possible car insurance costs for comprehensive and collision?
Comprehensive and collision insurance provide coverage for damages to your own vehicle. Comprehensive insurance covers damages to a car from non-collision events, such as theft, fire, or natural disasters. Collision insurance covers damages to a car from collision events, such as an accident with another vehicle or object.
The cost of comprehensive and collision insurance varies greatly based on factors such as the make and model of the car, the geographic location of the vehicle, the policyholder's age, gender, driving history, and the deductible chosen.
Estimated ranges for comprehensive and collision insurance from different insurance companies include:
Allstate: $250 to $1,000 per year for comprehensive insurance and $500 to $2,000 per year for collision insurance
Progressive: $110 to $550 per year for comprehensive insurance and $220 to $1,100 per year for collision insurance
State Farm: $100 to $300 per year for comprehensive insurance and $200 to $500 per year for collision insurance
It’s important to shop around and compare quotes to find the best coverage.
How to compare different car insurance companies' coverage costs
There are a few key things to consider when comparing the coverage costs of different auto insurance companies:
Coverage types: It’s important to ensure that you’re comparing the same types of coverage between different insurance companies. It’s difficult to compare the costs accurately if one company only offers liability coverage while another offers liability, collision, and comprehensive coverage.
Deductibles: Different companies offer different deductible options, which affect the policy's overall cost. Make sure to compare the same deductible amount when comparing costs.
Discounts: Many insurance companies offer discounts for having a good driving record, multiple cars on a policy, and insuring your home with the same insurance company. Ask about any available discounts when getting quotes, as they are able to significantly reduce the cost of coverage.
Limits: It’s also important to consider the limits on each policy. States often require a minimum amount of liability that you must carry to operate a vehicle legally in that state. Each type of coverage, from liability to comprehensive, will include a policy limit. The limit is the maximum amount the insurance company will pay, usually per person and accident. If one policy quote is only a few dollars more than the other, with significantly higher limits, it may still be the most economical choice for an individual’s needs.
Reputation: It’s a good idea to research the reputation of the insurance companies you’re considering. Look for reviews from current and former customers, and analyze the company's financial stability and customer service record.
State Farm, Allstate, GEICO (owned by Berkshire Hathaway), Progressive, and Farmers are among the largest car insurance companies that, combined, carry more than 54% of the insurance market.
How to calculate Progressive auto insurance cost
Several factors affect the cost of a Progressive auto insurance policy, including:
The type of vehicle: The vehicle's make, model, and age affect the insurance rate.
Driving record: A clean driving record helps you get a lower insurance rate, while a history of accidents or traffic violations increases the rate.
Location: Insurance rates vary significantly depending on the insured's location. Urban areas generally have higher rates than rural areas.
Age and gender: Younger and male drivers generally pay higher insurance rates than older drivers and female drivers.
Coverage level: The amount of coverage to choose affects the insurance rate. More comprehensive coverage generally costs more than basic coverage.
You can use the company's online quote tool, or contact a local Progressive agent for more information to calculate the cost of a Progressive auto insurance policy. You should compare rates from other insurance companies to ensure you get the best rate.
A Progressive policy for car insurance costs about $2,862 per year for full coverage and $1,932 per year for minimum coverage on average, according to real-time quote data from Insurify. The average cost of car insurance nationwide for full coverage is $3,546, so Progressive policyholders generally pay less. The average cost of minimum coverage nationwide is $2,362 per year, so the premiums for minimum coverage through Progressive are generally less than the national average. To learn more information about Progressive to generate cost estimates, take a look at our Progressive car insurance review.
How to calculate State Farm car insurance cost
Several factors affect the cost of car insurance from State Farm. Here are some steps to follow to calculate an estimate of the car insurance cost from State Farm:
Gather information about the car. You’ll need to provide information about your car, including its make, model, and year. You also need to provide information about its safety features, such as airbags and anti-lock brakes.
Determine your coverage needs. You should decide on the desired level of coverage, which includes liability coverage, collision coverage, and comprehensive coverage. You must consider any additional endorsements or desired riders, such as gap insurance or roadside assistance.
Consider any discounts. State Farm offers various discounts that reduce the cost of car insurance. The discounts are available to individuals with a good driving record, multiple cars insured with State Farm, or who have completed a defensive driving course.
Get a quote. You may contact the company online, by phone, or by visiting a local agent to obtain a quote for car insurance from State Farm. Having all the necessary information readily available when requesting a quote is important.
Compare quotes. You should compare quotes from other insurance companies once you’ve obtained a quote from State Farm to ensure you get the best deal.
State Farm's average annual full-coverage premium is $2,102, which is lower than the national average of $3,546. The company's average minimum-coverage premium is $1,505 per year, which is lower than the national average of $2,362. State Farm offers a range of car insurance discounts that help lower the rate even further. Reading Insurify’s State Farm car insurance review will provide more detailed information to help you calculate the possible rates from this insurer.
How to calculate GEICO car insurance cost
You need to consider several factors, such as the type of coverage needed, to calculate the cost of GEICO car insurance. Some factors include the make and model of the vehicle, the location, the age and driving history of the individual, and personal details, including marital status and credit score. Here’s a step-by-step guide to help you calculate the cost of GEICO auto insurance.
Determine the type of coverage needed. GEICO offers various auto insurance options, including liability coverage, collision coverage, and comprehensive coverage. You need to determine the level of coverage that meets your needs and budget.
Gather information about the vehicle. You need to provide details about your vehicle, including the make, model, year, and value, to obtain an accurate car insurance quote from GEICO.
Consider the location. Car insurance costs vary significantly depending on where you live. GEICO takes your location into account when calculating the car insurance quote.
Consider age and driving history. Age and driving history affect the cost of car insurance. GEICO considers factors such as your age, gender, and driving experience when calculating a car insurance quote.
Provide personal details. GEICO asks for personal information, such as name, address, and phone number, to generate a car insurance quote.
Get a quote from GEICO. You can obtain a car insurance quote from GEICO by visiting the website or contacting a representative after obtaining all the necessary information.
Compare quotes. It’s a good idea to compare quotes from multiple car insurance companies to find the best rate. You can do this by using an online comparison tool or directly contacting multiple insurance companies to request quotes.
Choose a policy. You should choose the policy that best meets your needs and budget after comparing quotes from various insurers. It’s important to review the terms and conditions of the policy carefully before making a purchase.
GEICO is one of the most affordable car insurance companies, according to a car insurance review by Insurify. The company's average cost for full coverage in 2022 was $2,138 per year, while its average cost for minimum coverage was $1,501 per year. The amounts are significantly lower than the national average for full coverage car insurance in 2022, which was $3,546 per year. To get more information to calculate costs and possible discounts for GEICO, take a look at our GEICO car insurance review.
How to get the cheapest car insurance
You have several ways to find the most affordable car insurance:
Look for the best deal. Compare quotes from different insurance companies.
Ask about discounts. Many insurance companies offer discounts for things like having multiple policies with them, having a good driving record, and completing a defensive driving course.
Increase the deductible. A higher deductible means you pay more out of pocket if you need to file a claim, but it lowers your premium.
Consider dropping unnecessary coverage. If your car is old or has a low market value, you may not need collision or comprehensive coverage.
Consider usage-based or pay-per-mile insurance. The amount to pay is based on how much you drive. This approach is a cost-effective option for those who don’t drive very much.
It's important to remember that the cheapest car insurance is not necessarily the best insurance for specific needs. It's always a good idea to review the coverage and terms of any policy carefully before purchasing it. GEICO is one of the most affordable choices of the three car insurance options mentioned, and it has a good reputation for paying claims.
How to estimate car insurance cost for high-end models
Follow the steps below to estimate car insurance costs for high-end models:
Determine the make and model of the high-end car. It’s important to determine the make and model of the high-end car being considered for purchase because certain makes and models have higher insurance costs due to their value, performance, and risk of theft.
Research the average insurance rates. Research the average insurance rates for the make and model of the car you’re considering. You can do this by contacting car insurance companies or by using online insurance-comparison websites.
Consider any additional coverage needed. Consider if any additional coverage, such as collision or comprehensive coverage, is necessary. Adding various types of coverage to an insurance policy increases its overall cost, but is often necessary depending on the value of the car, if the car is financed, and your personal situation.
Take into account any personal factors. You should consider any personal factors that impact your insurance rates, such as your age, driving history, and location. Insurance rates vary based on the mentioned factors, so you need to consider them when estimating the cost of your car insurance.
Consider purchasing a higher deductible. A higher deductible will often make auto insurance for high-end models more affordable, assuming you have the resources to pay the deductible if something happens. A higher deductible results in increased out-of-pocket expenses in case of an accident, but it reduces the monthly insurance premium.
Shop around and compare rates from multiple insurance companies. You should shop around and compare rates from multiple insurance companies. You need to compare rates and coverage options to get the best deal on car insurance for your high-end vehicle model.
Consider purchasing additional coverage options. Consider additional coverage options, such as gap insurance or roadside assistance, if they are not included in the policy. The options provide extra protection and peace of mind but increase the overall cost of the insurance policy.
There are several key factors to consider before purchasing a car:
You need to determine your budget, including the down payment, monthly payments, and other related expenses.
Consider your needs, including the car's purpose and the number of people to be accommodated.
Have a used vehicle inspected by a certified mechanic to ensure it’s in good condition and to avoid any unforeseen costly repairs.
Consider the car's features, such as fuel efficiency, safety ratings, and tech features, as well as its resale value if you plan to sell it in the future.
Carefully consider the interest rate and terms of the loan to ensure you’re getting a good deal if you’re financing the car, as well as the future cost to insure the vehicle.
How does car safety affect car insurance estimation?
Car safety features have a big impact on car insurance rates. Insurance companies take into account features like airbags, anti-lock brakes, and stability control when calculating premiums because they reduce the likelihood and severity of crashes. Insurance companies use actuarial tables to calculate the probability of a car being involved in an accident, which is then used to determine the cost of premiums. The insurance company offers a lower premium if a car has a good safety record and is equipped with safety features that have been shown to reduce the likelihood of a crash or the severity of injuries in a crash.
How does retail price change car insurance cost?
The retail price of a car impacts the cost of car insurance. Generally, more expensive cars have higher insurance premiums because they’re more costly to repair or replace if they’re involved in an accident. However, this isn’t always the case.
Insurance costs for some luxury vehicles are lower due to their advanced safety features and lower risk of theft. Additionally, the type of car impacts insurance costs. For example, sports cars and high-performance vehicles are often more expensive to insure due to their high speeds and tendency to be involved in more accidents. On the other hand, sedans and SUVs have lower insurance premiums because they are generally safer and less prone to accidents.
It’s important to consider the car's age when determining insurance costs. Older cars are generally cheaper to insure because they’re not worth as much and are less expensive to repair or replace. Newer cars, on the other hand, have higher insurance premiums due to their higher value.
Location plays a role in car insurance costs. Insurance premiums are higher in urban areas due to a higher incidence of accidents and car thefts. Insurance premiums are lower in rural areas with less traffic and fewer incidents of theft. The retail price of a car, as well as factors like the type of vehicle, age, and location, all have an impact on the cost of car insurance.
How does the term of car insurance affect the cost?
The term or length of a car insurance policy refers to the length of time for which the policy is in effect. The policy's term impacts the cost of car insurance because a longer term means purchasing more coverage. Therefore, longer-term policies tend to be more expensive than shorter-term policies.
Several factors affect the cost of a car insurance policy with a longer term, including the type of coverage, the deductible, the age and make of the vehicle, the driving record of the policyholder, and the location where the vehicle is driven. Generally, a longer-term policy is more expensive initially. However, it often locks in a rate, saving money over the long term and may come with a discount if paid in full. It’s important to consider individual needs and budgets when deciding on the term of a car insurance policy.
How to estimate long-term car insurance cost
The following factors affect the cost of long-term car insurance:
Type of vehicle: The vehicle's make and model impact the insurance cost. Luxury or high-performance vehicles generally have higher insurance costs.
Age and driving history: Age and driving history of the policyholder affect the cost of insurance. Younger, less experienced drivers pay more for insurance due to a higher perceived risk.
Coverage level: The level of coverage chosen affects the cost of insurance. Higher levels of coverage come with a higher premium.
Location: The location where you live and park your car influences the cost of your insurance. If you reside in an area with a large number of vehicle thefts or vandalism, it increases the risk for insurers. The increased risk is passed onto policyholders who reside in higher crime locations in the form of higher prices
Deductible: The deductible is the amount to pay out of pocket before the insurance begins paying for a covered event. A higher deductible lowers the premium, but you’ll pay more out of pocket if you have an accident.
You can get an estimate of long-term car insurance costs by using an online insurance calculator or by requesting quotes from multiple insurance companies.
How does a driving record affect the cost of car insurance?
Insurance companies use a variety of factors to determine the cost of car insurance policies, including a person's driving record. A driving record is a history of a person's driving habits, including any traffic violations or accidents they have been involved in. Insurance companies use it to assess the risk of insuring a person and to set premiums accordingly.
Generally, drivers with a clean driving record are considered lower risk and offered lower car insurance premiums. Drivers with poor driving records, such as multiple traffic violations or accidents, are considered a higher risk and are charged higher premiums.
It’s important to note that the impact of a driving record on car insurance premiums varies depending on the insurance company and the specific circumstances involved. Some insurance companies emphasize a person's driving record more than others, and the severity of the violations or accidents is a factor.
Maintaining a clean driving record is one way to help keep car insurance costs down. Follow traffic laws, avoid distractions while driving, and take defensive driving courses to improve your skills behind the wheel.
What to know for estimating car insurance coverage cost
Several factors influence the cost of an individual's car insurance coverage, including:
The type and model of the car
The driver's age and driving record
Where the vehicle is parked at night
The deductible chosen
The insurance company selected
Any applicable discounts
For example, certain cars are more expensive to insure due to the higher cost of repairs or replacement. Younger drivers with a history of accidents or traffic violations are considered higher risk and pay more for insurance. Additionally, insurance premiums vary based on location, as certain areas have higher rates of accidents or theft.
The chosen coverage limits and deductibles impact the cost of insurance, as higher limits and lower deductibles generally result in a higher premium. Comparing quotes from multiple car insurance companies is essential, as different companies offer different rates for the same coverage. Finally, you should use discounts you’re are eligible for, such as a good driver discount, a good student discount, or insuring multiple vehicles.
Why should I know car insurance coverage types for cost estimation?
It’s helpful to be aware of the various types of car insurance coverage when you attempt to estimate the cost of your car insurance policy. Various coverage types offer different levels of protection, and each type has a different cost. Policyholders make informed decisions about their car insurance policy and select a policy that meets their needs and budget by comprehending the different car insurance coverage types and how they safeguard individuals.
Why should I know car insurance rate factors for cost estimation?
Knowing what insurers are looking for and taking steps to improve your risk profile will help you understand the factors that affect car insurance rates. Understanding the factors involved in a risk profile helps you accurately compare the cost of different policies.
It’s important to understand your policy and see how car insurance rate factors such as age, driving history, and car type affect the rate when shopping for car insurance. Additionally, understanding the factors for cost estimation helps you make informed decisions about your coverage, such as paying a higher deductible for a lower premium or taking a defensive driving course to qualify for a discount.
How to calculate car insurance cost with vehicle parts and equipment coverage
Custom parts and equipment coverage (CPE) is usually purchased as an endorsement or rider to traditional insurance. You might consider CPE when you’ve invested significant money making customization or upgrades to your vehicle. These upgrades will be used to calculate the cost of car insurance with vehicle parts and equipment coverage.
Additionally, the type and amount of equipment to be covered affect the cost of the policy. Understanding the terms of the proposed policy is critical. Take the following steps to calculate the cost of car insurance with vehicle parts and equipment coverage:
Determine the vehicle's type and value. The vehicle's make, model, and age affect the insurance policy's cost. Generally, newer and more expensive vehicles tend to cost more to insure.
Have documentation of custom parts and equipment. You should thoroughly understand all aftermarket custom parts and equipment on your vehicle. You’ll need receipts for the equipment, customizations, and to help determine the amount of CPE insurance you need.
Know your driving record. Your driving history, including any accidents or traffic violations, affects the cost of insurance. You may be eligible for lower rates if you have a good driving record.
Choose coverage limits. You need to decide on the desired coverage for your vehicle and any equipment included in the policy. Typically, higher coverage limits result in a higher premium.
Select a deductible. The deductible is the amount of money you must pay out of pocket before your insurance company covers the remaining costs of a claim. A higher deductible lowers the premium, but you’ll have to pay more out of pocket if you need to file a claim.
Get quotes from multiple insurance companies. It’s a good idea to shop around and get quotes from multiple insurance companies to compare prices and coverage options. Comparison shopping can help you find the most affordable policy that meets your needs.
Calculate the total cost. The total cost of the insurance policy is calculated by adding the premiums, fees, and additional endorsements or riders for each coverage option after obtaining quotes from multiple insurance companies and selecting the desired coverage limits and deductibles.
Compare Car Insurance Quotes Instantly
Data scientists at Insurify analyzed more than 40 million real-time auto insurance rates from our partner providers across the United States to compile the car insurance quotes, statistics, and data visualizations displayed on this page. The car insurance data includes coverage analysis and details on drivers' vehicles, driving records, and demographic information. Quotes for Allstate, Farmers, GEICO, State Farm, and USAA are estimates based on Quadrant Information Service's database of auto insurance rates. With these insights, Insurify is able to offer drivers insight into how companies price their car insurance premiums.
- Progressive. "What are the different types of car insurance fraud?." Accessed January 31, 2023
- National Association of Insurance Commissioners. "2021 Market Share Reports for Property/Casualty Groups and Companies." Accessed February 1, 2023