If you own a car, then buying car insurance is a must. In most states, auto insurance is required of all drivers and there are penalties involved if you are caught driving without insurance. But, how much coverage do you need, and how much will it cost? Finding the best insurance rate will be key to not breaking your budget.
At Addition Financial, our members often ask us for advice about topics related to personal finance, and that includes asking about the average car insurance cost they can expect to pay. We’re happy to help since understanding the cost of insurance for your vehicle can help you budget accordingly. Here’s what you need to know.
Car Insurance by the Numbers
It may be helpful to know some basic statistics about your car insurance rate before we get into how you can evaluate your premium and decide whether you’re paying too much.
Brad Cummins, the Owner of Insurance Geek, told us this:
"The average American pays $1,764 annually for car insurance, vehicle models depending. Everyone should use this as a frame of reference."
Average costs can vary widely from state to state. As of 2019, Michigan had the highest average auto insurance premium at close to $3,000, while Maine had the lowest where average car insurance costs an average of $1,000. In Florida, the average cost for the minimum insurance policy required is $685, while the average cost for full coverage is $2,321. Overall, auto insurance is a $288.4 billion dollar industry.
It’s worth noting that most states require car insurance coverage for all drivers. The two exceptions are New Hampshire and Virginia. In New Hampshire, drivers without insurance are responsible for up to $50,000 in liability and $25,000 in property damage if they are at fault in an accident. In Virginia, an uninsured driver can pay a $500 fee to avoid buying car insurance, but they are still liable for damages if they cause an accident.
What Are the Auto Insurance Requirements in Florida?
Before we review the factors that can impact how much you pay for car insurance, let’s talk about the requirements for Florida residents. As a Florida-based credit union, we want to make sure that our valued members know what their legal obligations are.
The state of Florida requires two different types of insurance coverage for all vehicles with four wheels. Proof of insurance must be provided in order to register your motor vehicle. The requirements are as follows:
- A minimum of $10,000 in Personal Injury Protection (PIP)
- A minimum of $10,000 in Property Damage Liability (PDL)
There are higher minimums if your car is registered as a taxi. In that case, you would need Bodily Injury Liability (BIL) of $125,000 per person and $250,000 per occurrence as well as a $50,000 PDL coverage level.
We should also note that with the rise of rideshare apps such as Uber and Lyft, there is a need for rideshare insurance. While Uber and Lyft provide company-wide insurance that offers drivers some protection, insurance provider will cover the driver any time the app is on.
What Factors Influence the Cost of Car Insurance?
There are many factors that can influence how much your auto insurance rate will be. Let’s review some of the most important things that can affect your insurance premium.
Alex Killingsworth is a Consultant with Superior Honda who told us this:
"Your location is one of the biggest factors in determining how much your car insurance will cost; high-density areas or state laws are a big determining factor for auto insurance cost."
If you live in a high-density area with higher-than-average crime rates, then you should expect your insurance provider to raise the cost of your car insurance premium more than if you lived in a rural area. Alex also talked to us about the ways that the type of vehicle you own can affect your premium and the cost of minimum coverage:
"Your car type is also very important. If your car has poor safety ratings or repairs are expensive, your auto insurance premium will often be higher."
We would add that the replacement cost of your car is a factor as well. It will cost more to insure a high-end vehicle such as a BMW or a Lexus than it would to insure a low cost automobile costing your car insurance company less to replace.
Is the Minimum Insurance Required Enough to Protect You?
One of the questions we asked our experts related to the minimum requirements. You know that Florida drivers must carry a minimum of $10,000 in PIP insurance and $10,000 in PDL coverage level – but is that enough? Here is what our experts told us.
Brad Cummins told us:
“I recommend following the 250/500/100 rule when it comes to an insured driver, as it covers all kinds of serious accidents caused, including property damage or bodily injury.”
The 250/500/100 rule translates to $250,000 per person injured in an accident, $500,000 for all bodily injuries combined and $100,000 for damage to the other party’s car and property. That might seem like a lot, but Brad also pointed out that most state minimums are insufficient to protect drivers who are in a serious accident.
Jaime Arias is a licensed insurance agent with Dynamic Insurance Solutions. He told us:
“The minimum liability coverage I recommend all my clients to get is $300,000 for bodily injury and $50,000 for property damage. I advise every driver to obtain comprehensive coverage limits much beyond the state minimum limits, as going by the state limits will guarantee to leave you severely underinsured.”
Laura Adams, MBA, is an Auto Insurance Expert with AutoInsurance.org. She said:
"Always choose enough vehicle coverages to make sure you can repair it or replace it if stolen. And you must have enough liability coverage to protect your assets if you get involved in a lawsuit."
Melanie Musson, a Car Insurance Expert at CarInsuranceComparison.com, added some advice to help drivers protect their assets:
"If you max out what a car insurer will offer you and still don’t have enough coverage, you should purchase an additional umbrella policy for added liability protection."
The bottom line is that saving a few dollars a month doesn’t balance the potential risks associated with being underinsured.
How Can You Tell if You’re Paying Too Much for Car Insurance?
Now it’s time to talk about price. If you’ve ever purchased insurance before, you know that prices can vary widely from insurer to insurer. Here are some pointers to help you figure out if you’re paying too much for car insurance and help you get a better deal that still offers you the protection you need.
Jaime Arias recommends doing a regular check-up to compare car insurance premiums. He said:
“The easiest way to find out if you’re paying too much for car insurance is to get a free, no obligation car insurance quote from various car insurance companies. My recommendation is to do this at least every two years, as an auto insurance company will almost never lower rates of existing clients proactively, even when the market softens and becomes more competitive.”
Laura Adams explained the reasons that prices can vary from carrier to carrier:
“Carriers offer different types and amounts of insurance discounts and evaluate potential policyholders differently, [including] what things are and aren't covered by liability car insurance.”
If you get a quote that offers the same coverage (or better) for less than your current premium, then it’s a sure sign that you’re paying too much. Here are some pointers to help you save some money when you’re buying car insurance:
- Maintain a clean driving record. Most insurance carriers offer discounts to people who have never been in an accident or received a ticket.
- Pay down your debt and repair your credit. Insurers may use your credit score in their underwriting process and a low score can increase your rates.
- Shop around regularly and compare rates. As our experts noted above, it’s always a good idea to see what’s available. We suggest getting quotes and comparing rates every six to twelve months.
- Ask your current carrier (for auto insurance, homeowner’s, or anything else) how much you can save by bundling your coverage.
- Ask your carrier about discounts. Many insurance carriers offer discounts to safe drivers (as noted above) as well as to drivers with low mileage. You may be able to take a defensive driving course to save some money.
- Consider increasing your deductible to reduce your premium. As a rule, policies with high deductibles cost less than those with low deductibles. Something as simple as increasing your deductible from $500 to $1,000 could save you a lot of money.
- If you’re someone who doesn’t drive much – for example, if you work from home – then you might want to consider opting for pay-per-mile insurance, which charges based on how much you use your car.
As you can see, there are many ways to save on full coverage car insurance. Using the tips we’ve included here, you can compare your existing rates with what’s available and decrease your monthly payments.
Car insurance is a necessary expense. Not only is it legally required in Florida, but it offers you necessary protection in the event you’re in a car accident. The information we’ve included here will help you evaluate your insurance costs and find the best possible deal for car insurance.
Are you planning to buy a new car? Addition Financial can help! Click here to read about our car loan options and start the application process today.
Posted on Dec 8, 2021
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