Average Cost of Car Insurance

A car insurance with liability coverage may be required in most states before you can even put your hands on the wheel. The average monthly cost of car insurance depends on several factors which all accounts to the level of risk a certain driver is exposed to. This includes the type of car, geographical location, and the drivers age, gender, credit, and driving history. It shouldnít take a very long explanation why either one of these can make your monthly premium soar sky-high or be as low as your magazine subscription. Car insurance for teens can be more expensive than for adults due to higher risk factors. Click here to find the average cost of car insurance for teens. Like all insurance, rates are just estimates until you actually get your policy in place.

Factors that Affect Cost
The cost of car insurance rates may largely depend on the information provided by the driver about themselves. It is a fact that the younger the driver is, the more chances of him getting into an accident. Younger drivers are more easily distracted by things such as the radio, texting, talking to passengers and showing off for the opposite sex or friends.

Older drivers tend to be more cautious when driving. This is not only a generalization but is also a fact supported by the high number of teenager-related car accidents per year.

Gender is also a factor. Note that these factors are not made-up postulations but are factual possibilities derived by insurance companies from historical data based on claims classified into different categories, stretching of up to twenty years. Your credit worthiness also matters, and your driving history and your likelihood to get into an accident is something that insurance companies would probably first ask about.

Just like when you are applying for a credit card, a loan or a mortgage. They will be checking if you are a good investment or a bad one, or if your risk level is just too high. Itís a possibility that they may refuse to provide you the insurance you are asking for. But in most cases, youíll just have to pay a higher premium than everyone else. Your risk level is classified into three categories, namely:  preferred, standard or non standard (a business euphemism to mean that you are high-risk).

Car Insurance Costs Vary Per Car and Driver
The type of car that you are driving will also be evaluated for crash worthiness, safety features, cost to repair, age and even its popularity to thieves. Some models are recorded to have experienced more collision than others. So when you are still looking for a good car, try to search for the model with the least likelihood of getting into an accident. Yes, it would always depend on the driver if he consistently drives drunk or prefers to just get a taxi when he has had too much to drink. But the car models safety feature can also be accounted for. The age of the car may indicate a higher possibility of engine malfunction, and one thing leads to another. Some cars have greater propensity of attracting thieves than others, and if your car is one on the list, you might as well prepare yourself for a higher premium.

The usual usage of the car is also one thing that tells the same story, if your car is used for pleasure, e.g. to visit grandma on the countryside or to go to the Grand Canyon every spring, expect a lower premium. Cars used for business, on the other hand, may require a higher premium. This is because the higher the mileage your car takes a year, the higher the risk of it getting into an accident. As you may have noticed by now, itís all about the risk.

Types of Coverage
Liability coverage comes as a default feature to any car insurance. Itís the part of it that allows you to make amends and, so to speak, and indemnify someone who was harmed by your actions that may have been the cause of an accident.  Comprehensive coverage can come as an add on which may result to you paying a higher premium, and like any other insurance, you can always go ala carte with it. What that means is that no matter what happens, you are covered. Usually there is still a deductible that will need to be met before the policy becomes active. But once that happens, you, the injured party, your vehicle or theirs will be covered up to what ever limits the policy specifies.

The estimated average cost of car insurance can go up to $150 a month with a clean driving history for a multi-car family; the cost for an individual car insurance which the same risk level may cost as low as $50. The state with the lowest average car insurance cost is Illinois while New York is the most costly. All other states come somewhere in between.

For most states you can find the average cost of car insurance in your area by entering your zip code in the box above. Your monthly premiums will be different than your neighbors but now that you understand some of the factors that come into determining the average car insurance cost, you'll be able to be a more informed consumer.

Why Average Car Insurance Rates by State Vary
Since each state can set their own guidelines for how car insurance is sold, the average car insurance cost varies widely from state to state. Since all states have different companies chartered to conduct business with in the states borders, as well as different financial requirements as to how much cash they need to keep in reserve, the risks and lifestyles associated with each one, and the types of crime, driving styles, and types of vehicles predominant in the states determines how the rates are figured.

Car insurance companies need to keep a lot of money in cash reserves to offset catastrophic events such as natural disasters (hurricanes, and earthquakes, forest fires etc. ) so that they can cover massive losses to many of their customers all at the same time. This is known as the 'minimum loss ratio'.  This is the dollar amount determined by the companies actuaries (bean counters/number crunchers) that helps them figure out what the worst case scenario would be in the event of a catastrophe. The idea being that the rates need to be set and averaged across all risk levels with the companies existing policy holders to offset the cost of a disaster to many, many vehicles at the same time. A simple collision is not nearly as devastating to the car insurance companies as a massive fire, earthquake, tornado, or hurricane would be.

Imagine how much money the car insurance companies had to have in reserve to offset the claims just from Hurricane Katrina alone! The cost of all car insurance is spread across all policy holders, and the state you live in can alone can affect the average car insurance cost per month or per year.
Car Insurance Costs by State - Factors that affect the cost
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Updated March 1, 2015
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