The Average Cost of Car Insurance

You may think that the cost of auto insurance coverage is the same no matter what, but there are several different factors that go into how much your auto insurance coverage will cost you. According to the Car Insurance Premium Index (CPI), the average cost of a policy for a male or female driver between the ages of 18 and 25, as of May 2009, is $1,837 per year.

Auto Insurance 101

Auto insurance is probably the most commonly purchased type of insurance policy in the country. By law, everyone who operates a motor vehicle in the United States is required to carry auto insurance. There are four main areas that you need to understand in order to fully understand how auto insurance is priced and the factors that can affect the pricing.

Deductibles

An auto insurance policy comes with a variety of deductible options for you to choose. The higher the deductible is on the policy, the lower the monthly premiums are, but the more you have pay out of pocket to cover repairs and expenses in case of an accident. Deductibles start as low as $500 and can go as high as $5,000. So, if you have a $1,500 deductible, you may save as much as a couple of hundred dollars per year over someone who has a $500 deductible.

There are also two different types of deductibles you need to be aware of and understand before deciding which deductible price point is most beneficial for you--collision coverage and comprehensive coverage. Collision coverage protects you when you have a car accident with another car or something else that isn't a car. This coverage covers the damages to your car, other cars and other items (such as a light pole or tree).

Comprehensive coverage protects you from damages that occur when a collision isn't involved. If you run over a pipe that is in the middle of the road and it flies up and breaks your windshield, this is where comprehensive coverage kicks in. The other good thing about this type of coverage is that as the value of your vehicle decreases, you can also decrease your comprehensive coverage, which can save you money--especially over time.

Bodily Injury and Property Damage Coverage

Unfortunately, when accidents happen, it's not only the vehicles that can be damaged. People and other types of property can be damaged as a result of the car accident. For this, there is bodily injury and property damage coverage available through your auto insurance carrier. The Insurance Information Institute (www.iii.org) suggests that you carry bodily injury insurance coverage that is two times the amount of your assets. This means that if your assets are worth $100,000, then you should carry bodily injury coverage of at least $200,000.

Some states have a minimum amount of bodily injury coverage that a driver is required to carry. Visit the iii.org website for more information on your state auto insurance laws and policies.

The property damage coverage of an auto insurance policy covers damage to vehicles as well as other types of property. The minimum amount of property damage coverage is $50,000 and will cost you less in a monthly premium than levels above the minimum.

Uninsured Motorist Coverage

Even though it is the law to carry auto insurance if you own a car, there are people tooling around town in their vehicles without any coverage at all or without enough coverage to benefit you if they run into you. While it increases your insurance premium, carrying uninsured or underinsured motorist liability coverage protects you in case you have an accident with one of these people. It covers your lost wages, medical expenses or pain and suffering caused by the accident, when the person at fault in the accident doesn't have adequate coverage to protect you.

Discounts

There are ways to reduce or keep the cost of your auto insurance policy to a minimum. Safety features such as an alarm, anti-lock brakes and air bags can save you money on your auto insurance premium so be sure to let the carriers you're comparing know about these features when applying for a policy.

Comparison shop your auto policy with insurance carriers you already have a relationship with. If you have a health, life or homeowners policy with a carrier, they may offer you deeper discounts on adding your auto policy as well.

One of the benefits of being driving ticket or accident free for a certain period of time is that it can decrease the cost of your auto policy. Talk with your insurance carrier about any and all ways you can take advantage of various types of discounts.

References

• CPI Average Cost
• Insurance Information Institute