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RMIIA
Auto Insurance Quick Links
Your car insurance is really six separate policies—some are required, others optional—carefully weigh your risks when buying protection for you and your family.
Carole Walker, RMIIA

Cost of Auto Insurance

How does my auto insurance company decide what it charges me? That's probably the most asked, least understood question about motor vehicle insurance coverage. Each insurer has thousands of auto insurance rates in every state it does business—rates for each type of car, each driver and every geographical area in the state. Each company also has its own surcharges and discounts available that impact these rates.

Most insurers have three basic goals in mind:

  1. They need to make enough money to cover all their policyholders' claims and pay their overhead expenses (staffing, light bill, phone bill, etc.), and if they're publicly held, still have enough money left over for their shareholders.

  2. They want to balance their risk by charging higher rates to drivers who file more costly claims, more often and lower rates to those drivers who file less expensive claims, less often.

  3. They want to stay competitive with other insurers in the markets they do business.

State Government Regulations

How your insurance rates are set also depends in part on which state you live in, because rates are regulated on a state-by-state basis. The insurer has to follow the regulations of the state you live in. Click on your state below to contact your state insurance department.

Also visit: Colorado | New Mexico | Utah | Wyoming

Auto Insurance Cost Q&A

Q. Why are my auto insurance premiums rising?

A. Over the past two years, both the accident rate and the size of insurance claims have climbed dramatically. These are the largest and most volatile components of auto insurance. A white paper, done by the Insurance Information Institute (iii) documents the increase in costs, suggesting some factors that may be causing the increases. The paper also discusses what insurance companies are doing to keep costs in check and what consumers can do to reduce the cost of their own insurance.

Click here to read the iii White Paper: More Accidents, Larger Claims Drive Costs Higher (October 2016) by iii

Click here to see the Slide Deck on Personal Automobile Insurance Rates (October 2016) by iii

Q. Why do things like my age, gender, credit and driving record affect what I pay for auto insurance?

A. What you pay for insurance is largely based on what kind of risk the company predicts you will be, based on known factors like your driving history, the kind of car you drive, how old you are, your gender, your marital status and where you live. These judgments aren't just based on instincts or whims. Insurance rates are based on a wealth of statistical data compiled by your company over a long period of time (commonly up to 20 years). Most insurance companies divide auto risks into three basic types:

  • Preferred (low risk)
  • Standard (average risk)
  • Non-standard (a nice way of saying high risk)

Q. Why does it matter what kind of car I drive?

A. Increasingly insurance companies are basing insurance rates on their claims experience when it comes to the safety record of the make and model of vehicle you are driving. Factors insurance companies may likely consider: crashworthiness, safety features (i.e. airbags, automatic seatbelts, anti-lock brakes), popularity with thieves, cost to repair, age of the vehicle. Every year new cars are separated into various categories according to price by insurers. The number of categories vary from one insurance company to another, but a basic premium is assigned to each price group. For more information on crash testing click here for the Insurance Institute for Highway Safety (IIHS).

Q. Why do my premiums go up if I get a traffic ticket or I'm involved in an accident?

A. Getting several tickets in a short period of time or being involved in an accident can put you in a higher risk classification depending on the severity of the violation and cost of the accident. However, your rates won't automatically go up.

Q. Why do auto insurance premiums vary depending on what I use my car for?

A. Typically, cars are classified based on whether they are used for driving to work, business, pleasure or farming. Cars used primarily for pleasure tend to have the lowest premiums, while cars used for business generally have higher premiums. Insurance companies determine classifications by the number of miles driven per year since the more you drive your car the more likely you are to get into an accident.

Q. What is the average cost of auto insurance?

The average insurance expenditure is calculated by adding all auto insurance premium collected for liability, comprehensive and collision coverages, and dividing by the number of insured cars for the year. This average is based on all policies - including liability-only and policies with optional comprehensive and collision coverage. Limits on policies vary widely and are based on state requirements as well as consumer choice.

The average auto insurance expenditure rose from $812 in 2012 to $8415 in 2013, according to a 2016 report from the National Association of Insurance Commissioners. In 2013 (the latest data available), the average expenditure was highest in New Jersey at $1,254, followed by the District of Columbia at $1,187, and New York at $1,182.

Cost of Auto Insurance by State

The following chart is based on the latest data from the 2016 National Association of Insurance Commissioners on 2011-2013 premiums. It shows the "average expenditure" - the total premium collected in each state for liability, comprehensive and collision coverage divided by the number of insured vehicles. The average expenditure reflects not only the cost of insurance, but how much people choose to purchase. States have different requirements and many people choose to purchase more than the minimum required limits. Keep these factors in mind when comparing states.

State 2013 Average Expenditure 2013
Rank
2012 Average Expenditure 2012
Rank
2011 Average Expenditure 2011
Rank
Alabama  $674 38 $659 37 $653 37
Alaska $889 14 $873 13 $873 13
Arizona $811 18 $781 18 $776 18
Arkansas $703 36 $679 35 $665 35
California $783 22 $749 22 $736 24
Colorado $778 23 $737 25 $723 27
Connecticut $1011 9 $986 9 $970 9
Delaware $1,101 7 $1,065 6 $1,052 6
D.C. $1,187 2 $1,154 2 $1,138 2
Florida $1,144 5 $1,127 4 $1,090 5
Georgia $801 19 $768 20 $755 19
Hawaii $739 29 $735 27 $748 21
Idaho $553 51 $534 51 $535 51
Illinois $745 27 $731 28 $727 25
Indiana $669 39 $637 40 $621 41
Iowa $572 50 $561 49 $552 48
Kansas $669 39 $632 42 $625 40
Kentucky $773 24 $759 21 $744 22
Louisiana $1,146 4 $1,112 5 $1,110 3
Maine $593 48 $582 47 $577 47
Maryland $979 11 $966 11 $956 10
Massachusetts $1,008 10 $976 10 $942 11
Michigan $1,131 6 $1,048 7 $983 8
Minnesota $745 28 $718 29 $696 31
Mississippi $768 26 $748 23 $740 23
Missouri $704 34 $683 34 $675 34
Montana $679 37 $658 38 $654 36
Nebraska $639 43 $616 44 $602 44
Nevada $936 12 $906 12 $904 12
New Hampshire $733 31 $716 30 $705 30
New Jersey $1,254 1 $1,219 1 $1,183 1
New Mexico $723 32 $695 32 $691 32
New York $1,182 3 $1,152 3 $1,108 4
North Carolina $625 44 $611 45 $600 46
North Dakota $605 47 $576 48 $549 49
Ohio $659 40 $634 41 $619 42
Oklahoma $768 25 $737 26 $716 28
Oregon $783 21 $741 24 $723 26
Pennsylvania $841 16 $827 16 $815 16
Rhode Island $1,066 8 $1,034 8 $1,004 7
South Carolina $794 20 $772 19 $749 20
South Dakota $581 49 $556 50 $540 50
Tennessee $704 35 $673 36 $650 38
Texas $895 13 $858 14 $842 14
Utah $734 30 $713 31 $712 29
Vermont $656 41 $642 39 $633 39
Virginia $719 33 $691 33 $679 33
Washington $838 17 $809 17 $806 17
West Virginia $859 15 $846 15 $834 15
Wisconsin $621 46 $598 46 $601 45
Wyoming $640 42 $618 43 $619 43
United States $841 NA $815 NA $797 NA

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