Your car insurance premium is the money you pay for a car insurance policy. You can typically pay your car insurance premium in monthly installments, bi-annually or annually, depending on your insurance company.
Here’s what you need to know about car insurance premiums and ways you can save.
How Are Car Insurance Premiums Determined?
Car insurance companies use several pricing factors when determining car insurance premiums. Here are the most common factors.
Your driving record
Your driving record is one of the biggest factors determining your car insurance premium. A driving record includes your history of at-fault car accidents and moving traffic violations, such as speeding tickets.
Drivers with recent at-fault accidents and major traffic violations will pay more for coverage than good drivers. When setting car insurance rates, your insurer usually reviews the last three to five years of your driving record, depending on your state.
Expect your car insurance rates will go up after a speeding ticket. A driver with a speeding ticket pays 24% more, or about $380 per year, compared to a driver with a clean driving record, according to a Forbes Advisor analysis.
You can also expect car insurance rates to increase after an accident if you were at fault. The average increase for accidents with property damage is 45%, and 47% for accidents that result in injuries, according to a Forbes Advisor analysis.
Your auto insurance coverage selections
The coverage you choose is also a major factor in deciding car insurance rates. The main types of car insurance are liability, collision and comprehensive, and uninsured motorist coverage. Don’t skimp on coverage that you need just to save money. That mistake could cost you in the long run.
For example, your state’s minimum liability car insurance requirement is likely, not sufficient. If you cause a car accident with multiple injuries, you could quickly exhaust the policy limit, which means you’ll get stuck paying out of pocket for others’ medical expenses and other bills. Generally, you want to buy enough liability insurance to cover what you could lose in a lawsuit, such as your savings.
Your car insurance deductible
A car insurance deductible is the amount of money deducted from an insurance check when you file a claim, such as a collision or comprehensive insurance claim. For example, if your vehicle repair estimate is $2,000 and you have a $500 deductible, you’ll get an insurance check for $1,500.
Generally, the higher your deductible, the less you pay in car insurance premiums. That’s because your insurer will pay less if you file a claim.
There is no car insurance deductible for liability claims made against you if you cause an accident.
The type of vehicle you drive
The make and model of your vehicle is another car insurance pricing factor. Your insurer looks at past claims from similar models to evaluate repair costs, payments made for comprehensive claims and theft rates.
Related: Most and least expensive cars to insure
Your age and driving experience
Young and inexperienced drivers will pay more for car insurance because they’re more likely to get into a car accident. Car insurance rates for young drivers start to go down around age 25. You tend to enjoy the best rates in your 40s and 50s, but your rates begin to creep back up again around age 65.
Related: How age and gender affect car insurance rates
Where you live
Your ZIP code is another important pricing factor. Drivers who live in cities usually pay more than drivers in the suburbs due to higher rates of car accidents, theft and vandalism. Your insurer also looks at your region’s weather-related claims (such as hail).
Other location-related factors include:
- The cost of medical care
- Car repair costs
- The frequency of car accident lawsuits
Your credit
Many car insurance companies look at your credit-based insurance score to help determine your rates in states where it’s allowed. California, Hawaii, Massachusetts and Michigan ban the use of credit in setting car insurance prices.
Other car insurance pricing factors
Car insurance companies also often look at non-driving factors when setting rates, such as:
- Whether you own your home
- Education level
- Occupation
- Marital status
- Gender
The use of non-driving factors for car insurance rates is controversial. Some consumer advocacy groups have raised concerns that this practice is inherently discriminatory.
How Much Is a Car Insurance Premium?
Nationally, the average cost for “full coverage car insurance” is $1,569 per year, according to a Forbes Advisor analysis of car insurance rates among large insurance companies. Your costs will vary depending on what type of coverage you choose and other cost factors. See the average in your state below.
How Can I Lower My Car Insurance Premium?
Here are some steps you can take to reduce your car insurance premium.
- Shop around. The best way to save is often to compare car insurance quotes among multiple insurers. Rates can vary by hundreds of dollars for the same coverage, so shopping around is an easy way to find out if you’re overpaying.
- Ask for discounts. You may be eligible for car insurance discounts, such as safe driver discounts or good student discounts.
- Take a defensive driving course. A state-approved driving course could help reduce any points you may have accumulated on your driving record for traffic citations, translating into cheaper car insurance. Some insurers offer discounts to drivers who have completed a driving safety course. And in some states, a discount is mandated for drivers at a certain age who do a safety course, such as age 55.
- Increase your deductible. You can save money by choosing a higher deductible for collision and comprehensive insurance. Just be sure you can afford to cover higher out-of-pocket costs if you need to file a car insurance claim.
What Companies Have the Cheapest Car Insurance Premiums?
On average, USAA auto insurance has the cheapest car insurance, according to a Forbes Advisor analysis of the best cheap car insurance companies. But USAA auto insurance is only available to active members of the military, veterans and their families.
If you don’t qualify for USAA, our analysis found that Geico, State Farm, Erie and Travelers offer competitive rates based on nationwide averages. It’s a good idea to also get quotes from other insurance companies because the cheapest companies can vary depending on your state, driving record and other factors.
Car insurance premiums by company
Featured Car Insurance Partners
1
Geico
$1,182
$1,579
Low
2
Nationwide
$1,540
$1,970
Very low
3
Travelers
$1,435
$1,828
Very Low
What’s the Difference Between a Car Insurance Quote and a Car Insurance Premium?
A car insurance quote and a car insurance premium are not the same. Here’s the main difference:
- Car insurance quote: The estimated cost of a car insurance policy.
- Car insurance premium: The actual amount you pay the car insurance company for coverage.
Your car insurance premium may be higher than what you were originally quoted online. An insurance company bases your quote on the information that you provide, but the final premium could vary for several reasons, such as:
- Your driving history. If you forget to mention a speeding ticket, your final premium will be higher than your initial quote. Your insurer will check your driving record when finalizing your premium.
- Your car’s vehicle identification number (VIN). Your quote will be based on the year, make and model of your car, but your insurer will need your VIN to finalize the premium.
- You added more coverage or changed the deductible. Your premium could be higher than the initial quote if you decide to buy higher policy limits, add optional coverage types or lower your deductible.
- Your credit. Insurers will usually take a look at your insurance-based credit score, which could significantly impact your premium. The use of credit in auto insurance rates is banned in California, Hawaii, Massachusetts, Michigan and Washington.
What Is a Car Insurance Premium vs. a Car Insurance Deductible?
Here’s the key difference between a car insurance premium and a deductible
- Car insurance premium: The amount you pay for a car insurance policy.
- Car insurance deductible: The amount deducted from an insurance check if you file a claim.
How Often Do I Need to Pay a Car Insurance Premium?
You typically have the option to pay your car insurance premium in monthly installments, bi-annually or annually, depending on your insurance company.
Most car insurance companies offer a pay-in-full discount. Pay-in-full discounts can often range from 6% to 14%, according to a Forbes Advisor analysis.
How Do I Pay a Car Insurance Premium?
You can typically pay a car insurance premium by credit card, debit card, checking account or savings account. Your insurer might offer the following payment options:
- Online
- By phone
- By mail
If you pay your car insurance premium in installments and have your payment automatically withdrawn, you can usually get an electronic funds transfer (EFT) discount between 3% and 6%.
What Happens if I Do Not Pay My Car Insurance Premium?
If you do not pay your car insurance premium, your policy will eventually be canceled for non-payment.
Your auto insurer is typically required to send you notice by mail or email before canceling your policy, depending on your state. You usually have between 10 to 20 days to make a late payment, depending on your state.
If your policy is canceled, you have an insurance lapse, which can cost you even more money when you buy another policy. And if you get caught driving without car insurance, you could face steep financial and legal consequences.
If you can’t afford to make a car insurance payment, contact your insurer as soon as possible. Your insurer may be willing to extend the grace period or set up a payment plan.
Related: When can your car insurance be canceled?
What Causes Car Insurance Premiums to Increase?
Your car insurance premium could go up when your policy renews. Here are some common reasons you might see an increase:
- You were at fault for a car accident.
- You received a moving traffic violation.
- You made a car insurance claim.
- You added another vehicle to your policy.
- You added another driver to your policy.
- There was an increase in claims in your area (such as car theft or weather-related claims).
- You moved to a new ZIP code.
- You had a lapse in coverage.
- You’re no longer eligible for certain discounts.
Not all car accidents increase your car insurance premium. For example, if your car was hit while parked or you were rear-ended at a red light, you won’t get hit with a rate increase.
Best Car Insurance Companies 2024
With so many choices for car insurance companies, it can be hard to know where to start to find the right car insurance. We've evaluated insurers to find the best car insurance companies, so you don't have to.
Methodology
To find full coverage rates by company, used data from Quadrant Information Services, a provider of insurance data and analytics.
Rates are based on a 30-year-old female driver with a clean record insuring a Toyota RAV4 with $100,000 in bodily injury liability coverage per person, $300,000 per accident and $100,000 in property damage liability, uninsured motorist coverage and any other coverage required in the state. The rate also includes collision and comprehensive with a $500 deductible.
Car Insurance Premium FAQ
How much car insurance do I need?
To determine how much car insurance you need, start with liability car insurance. The state minimum is insufficient if you cause a major car accident. If you cause an accident with multiple injuries, medical expenses can quickly exceed the state minimum and you will be on the hook for any amount above your policy limits. A good rule of thumb is to buy enough liability insurance to cover assets (like your house and savings account).
Your state might have other requirements, such as uninsured motorist coverage or personal injury protection. It’s a good idea to talk with your insurance agent about the appropriate amounts of coverage for your needs.
If you want coverage for your own car repair bills for problems like car accidents, vandalism, car theft, floods, fires and other types of problems, you’ll want to add collision and comprehensive insurance. You can also add other optional coverage types to plug any gaps in your coverage, including rental reimbursement insurance or roadside assistance insurance
Will I get a car insurance premium refund if I cancel my coverage?
If you cancel your car insurance before the end of the term, you may get a car insurance premium refund. For example, if you paid in full for an annual term and you cancel your insurance because you sold your car, your insurer should refund you for the remainder of the period. Some insurance companies might charge a cancellation fee.
How does accident forgiveness insurance work?
Some insurance companies offer accident forgiveness insurance as part of coverage or as an optional benefit that you can add to your policy. If you have this coverage and you’re at fault for a car crash, your insurance company will “forgive” the accident and your car insurance premium will not increase.
The rules of accident forgiveness vary by insurer (and may not be available in every state). Accident forgiveness isn’t unlimited. It usually applies only to one accident per policy, not per driver on the policy.
