Personal Finance Expert
Tyron Jones is a finance expert who has operated within the auto insurance business for more than 10 years. He has written many other finance related articles for a number of prominent publications.
Car insurance is one of those things that you simply need to have. However, that doesn’t mean that you need to pay too much for car insurance. This article will help you understand how car insurance companies set their prices. It will also give lots of helpful tips to help you save money on your car insurance.
We’ll go over the things car insurance companies consider when they’re giving you a quote. We’ll also help you understand the different types of car insurance and how those different types are priced. Finally, we’ll go over some great ways to lower the cost of your car insurance regardless of your situation. Use this information to make sure you’re protected from liability, driving legally, and keeping more of your hard-earned money.
Understanding Car Insurance Prices
The most important thing to understand about car insurance pricing is that insurance is a risk-based business. This is because insurance companies want to turn a profit. That means that they’ll try to figure out what the odds are that they’ll have to pay out on someone’s insurance policy. The greater the chance the insurance company will have to pay for a claim, the more they’re going to charge for insurance.
As a result, it can be easy to understand how different things will affect car insurance prices. Anything that makes a car or driver safer will cause the price to go down, while anything that increases the odds and/or the cost of an accident or injury will cause the price to go up.
You can use this information to make educated decisions about what kind of car you want and how much you’ll have to pay for insurance. The more risk factors that a car introduces, the higher the cost of insurance will be.
It’s also important to keep in mind that an insurance company doesn’t just look at the risk of an accident or payout, they also take into account the risk they won’t get paid. That’s why having a lower credit score or not having continuous coverage will cause the price of your insurance to go up. Car insurance companies see these situations as evidence that they’ll face a greater risk of a financial loss by insuring you.
Risk Factors that Affect Car Insurance Prices
Insurance companies are very good at analyzing risks and determining the odds that they’ll have to pay out. They use statistical data to help them determine the risks a specific driver or car poses. They combine what they know about a particular person or car with the statistical data they have.
Car insurance companies use lots of different factors to decide what kind of risk someone poses. Some of the biggest ones are:
- Driver’s age
- Driver’s gender
- Car make and model
- Home address
- Miles driven per year
- Driver’s record
- Driver’s credit score
- Driver training
As you can see, each of these factors influences both the odds an insurance company will need to pay out on a claim and/or how much a claim will likely be. For example, a young, inexperienced driver with a very fast car is not only likely to cause an accident, but that accident will probably cost more to cover. That’s why insurance for this situation would be so high.
Different Types of Car Insurance and Costs
In addition to the different risk factors that affect car insurance prices, the specific insurance product you get is also a huge factor in the price you pay for insurance. While there are a ton of different options for auto insurance, we’ll look at the two most common types of insurance people look for.
Full Coverage/Minimum Legal Coverage
The first, and most common, type of insurance coverage is what some people call full coverage, which usually means state minimum legal coverage.
Every state has its own insurance laws. These laws regulate insurance products and also establish a state minimum legal liability coverage. This type of coverage protects you from liability in accidents where you’re at fault. It provides coverage for damage to people and properties.
Each state sets different minimums for this protection. The minimums and other regulations all affect the cost of insurance. Another thing that can affect the insurance is if the state has a no-fault insurance law.
A no-fault insurance law means that your insurance has to cover your injuries and/or property regardless of who is at fault in an accident, up to a certain limit. States with no-fault laws tend to have slightly higher insurance prices.
The other most common type of insurance coverage is comprehensive coverage. This type of insurance provides insurance to cover repairs and replacement for your car if you’re in an accident. It also usually comes with several other perks, like rental car access while your car is being repaired.
However, comprehensive coverage is more expensive than state minimum coverage. That’s because adding your car to the policy means there’s a higher chance that the insurance company will have to pay out, and they’ll have to pay out more if they do approve a claim.
In many cases, if you finance your car, part of your finance agreement will be that you’ll maintain comprehensive coverage on the vehicle until you’ve paid off your loan. The comprehensive coverage pays out to your lender first before making any payments to you.
This usually isn’t part of some state law, but rather is part of a private contract for your financing. This means that you should expect to pay more for car insurance if you’re moving from a car you completely own to a car you’re financing, especially if you currently only have state minimum liability insurance.
Ways to Save on Car Insurance
Thankfully, there are lots of ways to save money on car insurance. That means proper planning and research can help you save a ton of money on your car insurance.
The first and most accessible way to save money on your car insurance is to take advantage of different discount programs offered by car insurance companies. These programs can change from company to company, as will the amount of a discount you get.
However, you can combine these different options to radically lower the cost of your car insurance. Some of the most common discount programs that help you get the cheapest car insurance are:
- Safe Driver Discount
- Good Grades Discount
- Driver’s Ed/Driver’s Training Discount
- Loyalty Discount
- Consistent Coverage Discount
- Multiple Policy Discount
- Paperless Billing Discount
- Automatic Debit Discount
- Low-Mileage Discount
- Senior Citizens Discount
- Veterans Discount
- Bundle Home/Renter’s/Life/Auto Discount
These are just some of the most common discount programs that auto insurance companies offer. There may be other options offered by your specific car insurance company or by a company in your state. While no one will qualify for all of these discounts, many of them are available to any car insurance customer.
One of the best options for lowering the cost of your car insurance is to take a driver training class, like driver’s ed or a defensive driving class. These can lower the cost of your insurance by as much as 10%. That means the discount you get from taking the class will pay for the cost of the class almost immediately. Furthermore, depending on your state, taking one of these classes can remove points from your driving record.
The next way to lower the cost of your insurance has to do with what kind of car you drive. If you pick your car with the cost of insurance in mind, you can get a substantial decrease in price.
Cars that are faster and have fewer safety features will cost more to insure than slower, safer cars. Additionally, the safety features in a car can offer you extra discounts. Some insurance companies will give you discounts for things like extra air bags, anti-lock brakes, and radar collision warning systems.
Now that we’ve covered a lot of the information about cheap car insurance, you’ve probably got quite a few questions. That’s why we put together this helpful FAQ. Use this information to get the best price on car insurance for you and let us know if there are any other questions about cheap car insurance you’d like answered.
General Questions about Cheap Car Insurance
This section will answer your general questions about cheap car insurance. Use it to help you understand more specific questions later.
Who has the cheapest auto insurance?
That depends on lost of different factors, including your state, your car, and your driving history. We recommend using an insurance price comparison site to get detailed information for your specific situation.
How to get the cheapest car insurance?
The best way to get the cheapest car insurance is to use comparison shopping tools to get options from companies in your state. In fact, these tools are so specific that they can get you quotes based on your actual physical address, so you’ll have the most accurate knowledge possible when you start comparing different car insurance prices.
Who has the cheapest full coverage car insurance?
Full coverage isn’t a term that insurance companies use. Most often, it refers to state minimum legal liability coverage. You should use a search tool to find out the information for insurance companies in your state. In the meantime we do help you find cheap full coverage car insurance through our quote form.
What company has the cheapest car insurance?
That depends on where you live and lots of other factors. Generally, state-specific insurance companies will have better rates than state-branches of national insurance companies. For example, in states where the Farm Bureau offers insurance, they’re generally the cheapest, as opposed to a national auto insurance company.
What state has the cheapest car insurance?
The cheapest state for car insurance is Maine, with an average insurance rate of $889. The next cheapest is Iowa, followed by Wisconsin.
When is the cheapest time to buy car insurance?
There isn’t actually a cheapest time to buy car insurance. The one exception is that you should get insurance before your current policy expires so you can qualify for a continuous coverage discount.
How to find the cheapest auto insurance in your area?
Internet auto insurance price comparison tools are the best way to shop insurance quotes and find the cheapest auto insurance in your area. They can get you quotes from local and national insurance companies so you can compare them and pick the best option.
Why you shouldn’t buy the cheapest liability auto insurance?
Getting cheap liability auto insurance means that you’ll only have state minimum coverage. If you’re in an accident and the damages exceed you insurance limits, then you’ll be liable for anything damages over the limit.
How much is the cheapest car insurance?
That depends on what state you live in and your particular driving situation. For the sake of comparison, the national average car insurance rate is about $1,365 per year. As a result, if your insurance costs less than that, then you’re probably getting a pretty good deal. We address this in more detail when we discuss how much is car insurance on average in another article.
Cheapest Car Insurance by Type
This section answers your questions about the cheapest car insurance by insurance type.
Who has the cheapest classic car insurance?
That depends on how you use your classic car and what you want out of classic car insurance companies. Grundy Worldwide is good for unusual vehicles, while Safeco has the best rates if you regularly use your classic car. American national is the best option for Street Rod drivers, And Hagerty usually has the best deals on cars that are undergoing restoration.
Who has the cheapest liability car insurance?
That depends on where you live. In most cases you should check with insurance companies that only operate in your state, as they have lower overhead and administrative costs, and usually pass the savings on to their customers. Also ask if they offer first month free auto insurance.
Who has the cheapest state minimum car insurance?
In many cases, you can get the cheapest state minimum coverage from companies that only operate in your state. National companies have lots of additional costs, like administrative staff, lawyers, marketing, etc. so they usually cost more than a single-state insurance provider.
Who has the cheapest car insurance for collector cars?
The cheapest car insurance for collector cars depends on what you’re looking for. We like American Collectors Insurance in most cases, as they provide the best options for comprehensive emergency expenses coverage.
Cheapest Car Insurance for Specific Groups and People
We’ll help you with answers about the cheapest car insurance for specific groups and people in this section.
What is the cheapest car insurance for young drivers?
It depends on lots of different factors, but according to the national averages, Nationwide insurance has the lowest costs for those with a 16, 16, 18, and 19-year-old.
What is the cheapest car insurance for new drivers?
According to national averages, Nationwide has the cheapest policy for parents to put their teen drivers on their insurance. However, this could change for you based on your state and your specific driving history.
What is the cheapest car insurance for teenage drivers?
National averages aren’t the best way to look for car insurance, as each state is different. However, nationally, Nationwide has the lowest rates for teen drivers, usually several hundred dollars cheaper than competitors.
Who has the cheapest car insurance for young drivers?
Different states might have different better options for young drivers, and the prices that we have access to don’t take any discount programs like good grades into account, but on average, Nationwide is the best choice for saving money on car insurance for young drivers.
What is the cheapest car insurance for college students?
The cheapest college student car insurance is usually legal minimum liability coverage. The companies with the cheapest car insurance for college students according to average national prices are State Farm, USAA, American Mutual Insurance, and American Family Insurance.
Who is the cheapest car insurance for 17-year olds?
Depending on the state you live in, the answer you get might be different. However, nationally Nationwide has the best average rates for a 17-year-old driver if they’re going on to their parent’s insurance policy. The average cost for this situation was $2,382 per year for a married couple with a 17-year-old driver.
What is the cheapest SR22 car insurance?
It might change for your state, but the national averages show that SafeAuto has the best rates for people who need insurance and have an SR22. The Farmer’s Bureau in your state might also have a good rate for your SR22 car insurance needs.
What occupation gives cheapest car insurance?
The five occupations that have the cheapest car insurance are accountants, dentists, engineers, military officers, and teachers.
Who has the cheapest car insurance for bad drivers?
Depending on how bad of a driver, Farmers insurance usually has the cheapest car insurance. However, in situations where you’ve caused more than $2,000 of damage, then Nationwide is the best option.
What is the cheapest car insurance for 18-year olds?
Nationwide has the best average cost for car insurance for an 18-year-old on their parent’s insurance. The average cost was $2,206.
What is the cheapest car insurance for first time drivers?
The cost of insurance for first time drivers can be dramatically affected by what kind of discount options you take advantage of. However, with no discount program and being put on your parent’s insurance, Nationwide has the best rate for 16-year olds, with an average rate of $2,514 annually.
What is the cheapest car insurance for young male drivers?
Young male drivers that aren’t on their parent’s insurance will face incredibly high insurance rates. That being said, Liberty Mutual, Allstate, Esurance, and GEICO tend to have the best average rates for people in this category.
What is cheapest car insurance when you have points?
That depends on what caused you to have points on your driving record. Liberty Mutual is generally the best for people who drove on a suspended license, had a DUI or were involved in a hit-and-run, while Nationwide has the best average rates for people with a reckless driving or speeding charge. So yes it's even possible to get cheap car insurance with DUI points.
At what age is car insurance cheapest?
All other factors being equal, people aged 55-65 generally have the cheapest car insurance rates, with a national average of about $1,690. After this age, average insurance prices start to go up again, but they won’t reach the same level that young and brand-new drivers face.
I have speeding tickets what insurance would be cheapest for a new car?
For people with speeding tickets Nationwide generally has the best rates. However, we encourage you to check out local prices in your state to make sure you’re getting the best option.
What is the cheapest car insurance for a 21-year-old?
21-year olds are right at the age where they can start to see a noticeable decline in the cost of insurance. In most states, GEICO will have the best rates for you, but you should check your state to make sure you’re not paying too much. Local and single-state insurance companies like the state Farmer’s Bureau could be good options as well. There is also Farmers rideshare insurance if you drive for one of these services.
Who are the cheapest commercial auto insurance brokers?
Nationally Progressive tends to have the cheapest commercial auto insurance options, however, you should check locally as many commercial insurance companies only operate in one state because of the complexity of obeying state regulations on commercial auto insurance.
How to get the cheapest auto insurance with a bad record?
The best way to get cheap insurance for bad driving records is to take steps to get discounts. Something like a defensive driving class can reduce the cost of your insurance by as much as 10%, which means the class will pay for itself quickly.
What is the cheapest car insurance for a single person driving for 3 years?
Amongst the national car insurance chains, Geico is usually the cheapest option for someone that’s been driving for 3 years as long as those 3 years of driving record are clean. Their average rate for a good driver is about $1,177 per year.
What is cheapest car insurance with bad credit history?
You'll need to compare companies that offer bad credit car insurance. According to the national averages, Nationwide offers the best prices for people with a bad credit history. The other good option is insurance through Farmers if it’s offered in your state.
What is the cheapest car insurance for disabled people?
It is illegal to charge you more for car insurance based on a physical or mental disability. Doing so would violate the Americans with Disabilities Act, and possibly other state and national laws. That means the cheapest car insurance for you will be whatever the normal cheapest option is in your state. Instead, focus on finding the cheapest car insurance you can get with your driving record, demographics, and address.
What is the cheapest insurance while I’m paying car off?
Most finance agreements for cars force you to have comprehensive coverage until you’re done repaying the loan. Most drivers get the best price from Geico in this situation, with a national average of $98 per month. State Farm can be a good option as well, with a national average of $114.
Cheapest Car Insurance by Car
This section answers your questions about the cheapest car insurance based on the car you want to insure.
What is the cheapest insurance for a 4-cylinder car?
Most car insurance companies treat different cars about the same, so the better way to approach insurance shopping is to find the best insurance for the type of driver you are.
What kind of car has the best gas mileage and cheapest insurance?
It’s smart to find a good combination between gas mileage and insurance if you want to save money operating your car. While the specific answer changes state by state, all of the cheapest cars with the best gas mileage are small, safe, hatchbacks with extra safety features. Learn more about how to save money on car insurance.
Which insurance company is the cheapest for Tesla car?
That depends on what kind of Tesla you have. For the 2016 model X, Progressive is the cheapest, with an average cost of $397. If you have a 2017 Model X, then Nationwide will be the cheapest.
What are the cars for teens for cheapest auto insurance?
The cheapest cars for teens to insure are those that aren’t very fast and have lots of safety features. Options like the Honda Civic, Subaru Outback, Ford Focus, and Volkswagen Golf are the best options.
What color car gets cheapest insurance?
This is actually a myth. While car insurance companies look at lots of different factors to determine the cost of insurance, actually the color of a car isn’t one of them. Instead car insurance companies are much more focused on other aspects of the car to determine the rate, like how quickly it accelerates and brakes and what kinds of safety features the car has.
Which sports car has the cheapest insurance?
The cheapest sports cars to insure are, in order:
- 2017 Ford Mustang
- 2018 Chevrolet Camaro SS
- 2018 Audi TT
- 2017 Porsche Boxster
- 2017 Subaru BRZ
- 2017 Toyota 86
- 2017 BMW Z4 Roadster
What to look in a car to get for cheapest insurance?
The best things to look for in a car to get the cheapest insurance are safety features that prevent accidents, a low cost to repair, and safety features that prevents injuries. These things all reduce the chance and amount that an insurance company will have to pay out, which lowers the cost of insurance.
Which small car has cheapest insurance?
Most small cars benefit from good prices on insurance. Generally, the cheapest small cars to insure are:
- 2016 Chevrolet Cruze
- 2016 Dodge Dart
- 2016 Buick Verano
- 2016 Honda Civic
- 2016 Ford Focus
- 2016 Volkswagen Golf
Rental Cars and Cheap Car Insurance
We’ll cover questions about cheap car insurance and rental cars in this section.
Which car rental has the cheapest liability insurance?
On average the cheapest liability insurance from a rental car company comes from either Dollar or Thrifty. They’re both tied with an average cost of $8.95 – $12.99 per day for supplemental liability coverage.
Who has the cheapest car insurance for rental company?
It can be hard to find the cheapest car insurance deal for a rental company in general terms. You’ll get different offers from different companies based on the size of the fleet you want to insure, how much business you do, and other factors. Check with local and national insurance companies to see what kind of commercial insurance offers they can give you to find the best rates.
What car rental company has the cheapest insurance?
In most cases, Thrifty rental car has the cheapest insurance options. They have the lowest costs on average for loss damage and supplemental liability insurance coverage.
Ways to Get the Cheapest Car Insurance
In this section we’ll answer your questions about the ways to get cheap insurance.
How to find cheapest car insurance quotes?
The best way to find the best rates is to compare auto insurance quote offerings online. Make sure that the tool you use has access to quotes from local and single-state insurance companies to ensure you get the best deal.
What is the cheapest way to get car insurance when I haven't had insurance for years?
The cheapest way to get car insurance when you haven’t had insurance in awhile is to shop around for policies. You can also get a short-term policy and then get a normal 6-month policy so you can get the discount for continuous coverage. Look for discounts such as a car and renters insurance bundle that will shave some of the costs off. Every little bit adds up for sometimes big savings.
What's the cheapest way to get car insurance when you have not had it in a while?
The best option to get car insurance when you haven’t had it for a bit is to use the internet to get quotes delivered to you. We recommend checking with local and single state insurance companies, as they are more likely to cut you some slack than the national companies.
Which is the cheapest car insurance comparison site?
All car insurance comparison sites should cost the same – specifically, they should be free services. These sites make money by getting a commission for referring you to an insurance policy, and shouldn’t charge you to look up different insurance quotes.