Coverages, Limits, and Deductibles
A number of factors affect car insurance rates — primarily what coverages, limits, and deductibles you choose for your policy. The more you buy (whether on your own accord or because the state requires it), the more you’ll pay.
Higher limits will save you money in the event of a serious accident, but they will cost you more in premiums, because the insurance company is obligated to pay more in the event of an accident to meet the higher limit. The difference between the maximum and minimum limits can add up to more than $1,000 each year in premiums. Similarly, a higher deductible means lower monthly payments, and vice versa.
Monthly costs also increase if you add these or other supplemental types of coverage:
- Collision coverage for your property damage from an accident
- Comprehensive coverage for non-collision claims like vandalism or theft
- Rental reimbursement or transportation expense coverage
- Gap coverage to pay off any remaining value on a financed car
- New car replacement coverage
- Towing and labor cost coverage
- Ride-sharing coverage (for ride-share drivers)
- Sound system coverage
- Classic car insurance6
What You Drive
Insurance providers use data from customer claims and industry safety reports to rate a vehicle’s safety. Safer vehicles are less expensive to insure, and ones that are not as safe cost more to insure.
Companies also consider how susceptible a vehicle is to damage, occupant injury, and theft, as well as how much it costs to repair.
Driving a vehicle that offers greater protection to drivers and passengers and that tends to be less expensive to repair will lower your costs. In general, newer and flashier vehicles cost more to insure. You’ll pay more to insure a new sports car than an old minivan.
How Often or How Far You Drive
If you use your car for business or you commute long distances, you will pay more for auto insurance. You can lower your costs by driving less, taking public transportation, and shortening your commute. For example, instead of driving straight to work, you might drive to the station and take a train.
Low-mileage drivers may even have the option to pay per mile. If you choose this option, your insurance provider will track how many miles you drive and use your mileage to set your premium.
Where You Live and Park Your Car
Urban drivers tend to pay more for auto insurance because cities have higher rates of theft, accidents, and vandalism. For example, if you live in Michigan, you’ll pay more for insurance if you live in Ann Arbor or Detroit than you would living in a more rural area. Insurance companies consider parking on the street riskier than parking in a garage and may increase rates accordingly. Areas prone to extreme weather (e.g., floods, wildfires) like Texas or California also see higher insurance rates.
If you have a history of accidents, speeding tickets, reckless driving, or a DUI, you will pay more for auto insurance. On average, if you’re at fault for an accident that causes property damage, your premiums will increase by about $650 per year for three years — which will cost you almost $2,000 overall.