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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.

In 2014, the countrywide average expenditure was $866, an increase of 2.98% over the previous year. The median state average expenditure was $783.according to a 2017 report from the National Association of Insurance Commissioners. In 2013 (the latest data available), the average expenditure was highest in New Jersey at $1,264, followed by Michigan at $1,227, and New York at $1,205.

Cost of Auto Insurance by State

The following chart is based on the latest data from the 2017 National Association of Insurance Commissioners on 2013-2014 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 2014 Average Expenditure 2014
Rank
2013 Average Expenditure 2013
Rank
2012 Average Expenditure 2012
Rank
Alabama  $695 38 $674 38 $659 37
Alaska $884 14 $889 14 $873 13
Arizona $837 19 $811 18 $781 18
Arkansas $729 34 $703 36 $679 35
California $815 23 $783 22 $749 22
Colorado $821 21 $778 23 $737 25
Connecticut $1,032 10 $1,011 9 $986 9
Delaware $1,126 7 $1,101 7 $1,065 6
D.C. $1,192 5 $1,187 2 $1,154 2
Florida $1,141 6 $1,144 5 $1,127 4
Georgia $840 18 $801 19 $768 20
Hawaii $752 30 $739 29 $735 27
Idaho $572 51 $553 51 $534 51
Illinois $775 27 $745 27 $731 28
Indiana $642 46 $669 39 $637 40
Iowa $586 50 $572 50 $561 49
Kansas $689 39 $669 39 $632 42
Kentucky $783 26 $773 24 $759 21
Louisiana $1,193 4 $1,146 4 $1,112 5
Maine $607 48 $593 48 $582 47
Maryland $1,001 11 $979 11 $966 11
Massachusetts $1,036 9 $1,008 10 $976 10
Michigan $1,227 2 $1,131 6 $1,048 7
Minnesota $773 28 $745 28 $718 29
Mississippi $797 25 $768 26 $748 23
Missouri $724 36 $704 34 $683 34
Montana $695 37 $679 37 $658 38
Nebraska $663 43 $639 43 $616 44
Nevada $970 12 $936 12 $906 12
New Hampshire $751 31 $733 31 $716 30
New Jersey $1,264 1 $1,254 1 $1,219 1
New Mexico $749 32 $723 32 $695 32
New York $1,205 3 $1,182 3 $1,152 3
North Carolina $644 45 $625 44 $611 45
North Dakota $630 47 $605 47 $576 48
Ohio $683 40 $659 40 $634 41
Oklahoma $808 24 $768 25 $737 26
Oregon $819 22 $783 21 $741 24
Pennsylvania $858 17 $841 16 $827 16
Rhode Island $1,106 8 $1,066 8 $1,034 8
South Carolina $825 20 $794 20 $772 19
South Dakota $601 49 $581 49 $556 50
Tennessee $724 35 $704 35 $673 36
Texas $905 13 $895 13 $858 14
Utah $766 29 $734 30 $713 31
Vermont $665 42 $656 41 $642 39
Virginia $743 33 $719 33 $691 33
Washington $872 15 $838 17 $809 17
West Virginia $871 16 $859 15 $846 15
Wisconsin $646 44 $621 46 $598 46
Wyoming $669 41 $640 42 $618 43
United States $866 NA $841 NA $815 NA

Additional Information
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