The Auto Insurance Guide for 2021

Looking for auto insurance? The average auto insurance premium in the US is around $1,600 per year. Auto insurance is a valuable financial tool to help you cover your liability and vehicle damage.

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What is auto insurance?

Auto insurance is the insurance that protects you against financial loss in the event of an accident. The insurance company will pay your losses as outlined in your policy. Policyholders pay annual premiums to insurers, and the company pays all or most of the costs related to auto accidents. Auto insurance premiums are different depending on age, gender, driving record, and other factors, and the coverage minimum is various by state, too.

Why do you need auto insurance?

Having auto insurance is required for drivers in almost every state. Auto insurance helps pay for covered losses, medical expenses, and legal fees resulting from accidents. Although some drivers have auto insurance because of the law, there are still many reasons to buy auto insurance.

  • Protect yourself and others
    Protect yourself and others The proper auto insurance can protect you, your family, your passengers, other drivers, and your vehicle. It may cover the pay for damage to another driver’s vehicle and your own vehicle. It also may pay for your medical expenses if you and your passengers are injured in an accident. Get an auto insurance quote to learn how it can protect yourself and your family.
  • Save time
    Dealing with a car accident can be time-consuming and tiring. A proper auto insurance helps you with repairs and replacements, vehicle towing, and covering the costs of damages. You don’t have to negotiate with other drivers when you are involved in the accident.
  • Supplement your health insurance
    Auto insurance may pay for medical bills such as dental work required as the result of an accident that health insurance normally won’t cover.
💡Takeaway: Auto insurance covers your liability and property damages from car accidents.

What are the types of coverage for auto insurance?

The most standard types of coverage are described below. The coverage may vary from state to state and company to company. You should always check your own auto policy to review the limits of your coverage

  • Liability
    There are two types of liability coverage, bodily injury liability and property damage liability. Liability means the responsibility you have to take in an accident. When you are at fault in a car accident, it covers you the cost of property damaged due to the accident and the medical expenses from resulting injuries. Most states require a minimum amount of liability insurance coverage that drivers should have. If you can afford it, it will be better to have coverage above your state’s minimum requirements because it will provide further protection. It reduces the risk for you to pay a large amount of money because of exceeding your policy limit.
  • Collision
    It is a type of coverage that pays for the repairs to your car. If your car is damaged in an accident involving a collision with objects such as another car, tree, mailbox, fence, pothole, or other objects, and single-car accidents that involve rolling or falling over, the policy helps pay the expenses of repairing or replacing your vehicle. Even though collision insurance is not required by any state law, drivers with paid-off cars should consider purchasing the insurance to protect their finances.
  • Comprehensive
    The coverage basically pays for the damage to your vehicle that isn’t caused by an accident such as weather damage, theft, animal damage, glass damage, vandalism, and other broad range of potential damage. This type of insurance may be costly but not necessary. With anti-theft or tracking devices on your car can make it more affordable.
  • Property damage
    If your property is damaged by another driver such as hitting by another car while parked, or if a vehicle slides off the road and damages your house, you can file a claim.
  • Medical Payments or Personal injury protection (PIP)
    PIP is often regarded as “no-fault” insurance, required mostly in states with no-fault insurance law. No matter if the accident is your fault, it covers your medical expenses and those your passengers can be paid. PIP includes medical expenses, funeral expenses, child care expenses, lost income, survivors’ loss, and household services. It doesn’t cover your car damage and property damage.
  • Uninsured / Underinsured motorist (UM/UIM)
    The coverage protects you from accidents caused by a driver without insurance or without enough coverage to pay for you. It covers you when the accident is not caused by you, and the at-fault driver doesn’t have (enough) insurance to cover your expenses or you are the victim of a hit and run.

What are the steps for purchasing an auto insurance policy?

So you’ve decided to purchase auto insurance. Now what?

  • Know yourself and your car
    To set a rate for your auto insurance, you need to provide the following information about the driver and the vehicle.
    1. Driver name and date of birth
    2. Driver’s license number and issue date
    3. Vehicle information number (VIN)
    4. Driver’s driving record
    5. The type, the age, and/or the value of your vehicle
    6. Anti-theft devices
    7. The record of other drivers on your policy
    The information affects your premium.
  • Determine what coverage you need
    You need to know how much of each type of auto insurance coverage you need. The coverages include liability coverage, collision coverage, comprehensive coverage, etc. It is important to know the amount and type of coverage you require. In addition to look for the coverage best for you, you will also need to look up the auto insurance requirements in your state. Your state minimums are the basics for determining coverage; they may be too low to cover you in the event of a major accident. There are also additional options such as roadside assistance, new car replacement coverage, rental reimbursement coverage, etc.
  • Get quotes and compare your car insurance quotes
    You should get multiple quotes and compare those quotes. You can go to online one-stop services and type in your information to have a list of companies for comparative quotes pretty quickly. Having high coverage limits for the necessary coverage types is always a good idea to be considered. Your quote may include some types of coverage you don’t need, and you should carefully look at the options. Click here to start a free quote.
  • Look for discounts
    Many types of auto insurance discounts are provided, and be sure you explore all your options related to discounts. Most common auto insurance discounts are multi-policy discount, multi-car discount, car safety discounts, new car discount, anti-theft discounts, good driver discounts, defensive driver discounts, good student discounts, student away at school discount, pay in full discount, electronic funds transfer discount, paperless discount, online quote discount, occupational discounts, alumni association and professional organizations, usage-based insurance program discount. Auto insurance discounts aren’t always straightforward. Make sure you understand how discounts work and always confirm available discounts when shopping for an auto insurance policy.
💡Note: Read your policy carefully about the limit of your personal item. If your expensive items are higher than the limit, you need to talk to your agent or call the customer service line to endorse those items.

How Do Insurance Companies Determine Auto Insurance Premiums?

The information about you and your car will be the factors to determine your premiums. Not all the insurers use the same factors, here is the list of some most common factors.

General information

Your age, gender, marital status, and driving experience are common factors used to determine your premium. In general, matured drivers encounter fewer accidents than young, novice drivers. Insurance companies tend to charge more if you are under age 25. According to data, Women have fewer accidents than men. If all the things are equal, women usually pay less than men. Married couples are found more likely to be safer than single drivers, resulting in fewer accidents. Therefore, married people usually get discounts and lower insurance rates on their auto insurance.

Driving record

You can get a lower premium if you have a better record. You will pay more if you or other drivers insured by your policy had a record on traffic violations or were responsible for accidents. If you are a new driver without an insurance track record, you may have to pay more, too.

Location

Your premium will be impacted where you live. By asking for your ZIP code, insurance companies can tell the cases of accidents and theft, rates of vandalism, and amounts of claims. Usually , living and driving in urban areas tend to have higher rates than living and driving in rural areas.

Insurance Credit Score

Insurance credit score is calculated from bankruptcies, length of credit history, number of credit accounts in use, and so on, in a credit report. The score helps insurers measure how well you manage your money. Statistically, people with low scores are more likely to file a claim. If you have higher insurance credit scores, you may get discounts from some companies.

Vehicle Types and Use

Purchase price, theft rate, cost of repairs, accident rate, and safety tests of your car model are common factors to determine your premium. If your car is a higher value car, new car, or costs more to repair or replace, rates will be higher. Also, if your car is equipped with high quality safety equipment such as collision warning systems or special features such as a hybrid engine, you may qualify for premium discounts. Additionally, why, how, and when you use the car is a factor to calculate your premium as well. If you drive fewer miles or drive during less dangerous hours of the day, some companies may offer you small discounts. Personal use of a car costs less than business use. Using cars for business purposes have higher chances to have an accident because the driving time is increased.

Amount of Coverage

Limits on your basic auto insurance such as limits or liability, the amount of your deductible, and the types and amounts of policy options such as collision coverage will affect the price you pay for coverage. Rates are higher for higher limits on the basic coverages and for policies with lower deductibles. You can increase your deductible to lower your premium.

Discounts

Your rates will be lower if you are qualified for having discounts mentioned above.

How much is auto insurance?

The national average for auto insurance is around $1600 per year. The premium is determined by factors such as your car, your driving history, your age, and your coverage, etc., In some states, your credit report is also used to determine your premium. Below is a report of the average car insurance price in the US. You can click any state to learn more details.

State Average Annual Premium
Alabama $856
Alaska $930
Arizona $994
Arkansas $848
California $957
Colorado $1,050
Connecticut $1,168
Delaware $1,221
District of Columbia $1,334
Florida $1,356
Georgia $1,127
Hawaii $803
Idaho $678
Illinois $897
Indiana $744
Iowa $674
Kansas $766
Kentucky $896
Louisiana $1,443
Maine $667
Maryland $1,149
Massachusetts $1,136
Michigan $1,358
Minnesota $840
Mississippi $930
Missouri $869
Montana $784
Nebraska $766
Nevada $1,141
New Hampshire $824
New Jersey $1,350
New Mexico $870
New York $1,349
North Carolina $705
North Dakota $659
Ohio $777
Oklahoma $895
Oregon $961
Pennsylvania $961
Rhode Island $1,300
South Carolina $1,020
South Dakota $693
Tennessee $820
Texas $1,096
Utah $889
Vermont $762
Virginia $819
Washington $994
West Virginia $913
Wisconsin $731
Wyoming $742
💡Note: Click the state to view more details.

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What companies offer car insurance?

Most insurance companies who offer various types of insurance such as GEICO, Farmers, Liberty Mutual. Additionally, there are some companies like Root, Clearcover who mainly sell auto insurance. Below is a comparison between those two options.

Standalone Bundle with auto insurance
Root, Clearcover, etc. Liberty Mutual, GEICO, Farmers, etc.,
• More brands and price options
• The company may have a partnership with your dealer
• Get a multi-policy discount
• Manage multi-policies at the same place

You can also shop around to see what is the best option for you. Click here to start a free quote to compare multiple companies for your auto insurance.


What are not covered by auto insurance?

Auto insurance may not cover your losses when your car is damaged because of “Acts of God” such as a hurricane, earthquake, or flood. If your belongings like laptop, phone, sunglasses, or other valuables inside the vehicle are damaged or stolen, they are not covered by auto insurance. However, you can make a claim under renters insurance or homeowners insurance. Also, auto insurance follows the car instead of the drivers. It means you will not be insured when you drive a different car.

If that car has insurance, you should be covered. If your family member or your friend drives your car, you may not be fully insured. It is important to check if your policy only covers the person listed in the policy, if your policy only covers the accident when you are in the car, if your policy covers your family members, or if your policy covers any licensed drivers who drive your car. Auto insurance does not cover the general maintenance and regular wear and tear. Some insurance companies may require you to exclude specific drivers such as drivers you live with who have a DUI or extensive accident history, you may prohibit that person from using your car to avoid high insurance prices. If that person drives your car and accidents happen, the insurance company will refuse to pay a claim.

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References

Disclaimer
Our articles are intended for informational purposes and should not be considered legal or financial advice. Our articles are not written or reviewed by insurance agents. Consult your policies with your agent or a professional for details regarding terms, conditions, coverage, exclusions, products, services, and programs.

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