The Average Price of Auto Insurance
All states in the U.S. require vehicle owners to insure their vehicles. For an auto insurance policy, the bare minimum is liability coverage, which pays for property damages and bodily injuries suffered by others as a result of the policyholder's actions. Some states may require car owners to have other forms of coverage as well, such as physical damages coverage, which includes collision and comprehensive coverage, and protection for underinsured and uninsured motorists.
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Average Premiums by State
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As of 2010, the average cost of auto insurance for one year is $1,430. This is a national average, and is calculated by taking into consideration the average price of premiums for all states. Depending on where you live, and other factors such as gender, age, marital status and type of vehicle driven, your premiums may be significantly more or less than the national average.
Drivers in only two states -- Louisiana and Michigan -- paid premiums of $2,000 or higher to insure their vehicles for one year as of 2010, Louisiana has the highest average, at approximately $2,511, which is more than $400 in excess of average premiums paid by the next most expensive state, Michigan. Other expensive states include Oklahoma, Montana, California, South Dakota, Georgia, Washington, D.C., and Illinois. Drivers in these states paid an average of $1,700 for one year's coverage. The least expensive states are Maine, Vermont and Ohio, where drivers paid less than $1,000 for one year.
Required Minimum Insurance
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State laws regarding auto insurance can affect how much of a premium drivers have to pay. Almost all states require that drivers have liability coverage, which includes coverage for bodily injuries and physical damages. Liability coverage is part of your insurance policy that will pay the other party in case of an accident that is caused by you. States that do not have an express requirement for liability coverage enforce financial responsibility laws that require drivers to be able to pay for damages and injuries they may cause. Drivers in these states typically prefer to have liability coverage to satisfy the state's requirements. The average cost of insurance is influenced by the state's minimum required coverage. For example, if one state required drivers to have $20,000 of liability coverage while another required $15,000, the average amount that drivers would pay in premiums would be higher for the first state.
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Setting Premiums
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When determining the average cost of insurance for a state, premiums paid by all drivers across all segments are considered. As a result, the amount a particular driver will have to pay to insure a vehicle for one year may be considerably different from the state average. Insurance companies set premiums based on the risk of insuring a particular driver, and the premium charged is a reflection of the risk that the driver will be involved in an incident and will make a claim. If an insurer determines that group A is "safe" and group B is "risky," it will charge higher premiums to the group that is more likely to be involved in an accident, to offset the risk.
Groups
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In general, young male drivers and newly licensed drivers have to pay the highest premiums. Additionally, for any given age, male drivers pay higher than female drivers and single drivers pay higher than married drivers. Along with age, sex and driving history, the type of vehicle you drive may also influence the cost of insurance. In general, vehicles with higher safety ratings and with moderate engine capacities are cheaper to insure than vehicles with low ratings and/or with high-powered engines.
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References
- Photo Credit car image by Byron Moore from Fotolia.com
