Car insurance

The True Cost of Auto Insurance in 2022: Annual Report

The true cost of car insurance refers to the average proportion of income drivers spend on auto insurance coverage. Nationally, drivers spend an average of $1,771 per year on full coverage car insurance, which accounts for 2.57% of the average American’s annual income. The average annual income in the United States is $68,852, according to data collected from the U.S. Census Bureau. The average percentage individuals spend on their car insurance varies widely by state and metropolitan area, and the regions where car insurance has the greatest impact on drivers’ finances may surprise you.

Section 1: How Much Do Americans Pay For Auto Insurance?

stats how Americans pay car insurance

The table and map above allow you to explore what proportion of income drivers are spending on auto insurance by state and metro area. Nationally, drivers spend an average of 2.57% of their income on car insurance coverage. In certain regions, drivers spend a much higher percentage than average, while in others, drivers spend a lower percentage.

Louisiana drivers spend the highest proportion of their money on auto insurance, at 5.26% of their income, followed by Florida at 4.42%. And, of the metro areas analyzed, Tampa and Miami drivers spend the highest percentage of income on their car insurance, delegating an eye-popping 4.49% and 5.58% of their annual income to auto insurance coverage, respectively. One reason these states may experience high true costs is that hurricanes and flooding are common, which may drive up insurance rates. Paired with the relatively low median incomes in both states, residents end up putting a significant portion of their budget toward car insurance.

Your geographic location isn’t the only factor that affects your car insurance rate. Life events like a change in your credit score (in most states), driving history and adding a teen to your policy usually affect your rates and the proportion of your income spent on car insurance.

True Cost Rank By State

The percentage difference displayed is between each state’s average premium and the national average annual cost of full coverage car insurance, $1771. True cost rank is based on the average total percentage of income spent on car insurance, not average premiums. The higher the ranking, the higher the true cost of car insurance.

The average cost of car insurance in the United States is $1,771 per year, claiming 2.57% of the average American’s annual income. Your individual car insurance rate depends on personal characteristics, so it will likely differ from the national average. Several factors that impact your car insurance include things like credit score (in most states), vehicle make and model, driving record and the characteristics of drivers insured on your policy.

Section 3: Factors That Impact the Cost of Your Car Insurance

The average cost of car insurance in the United States is $1,771 per year, claiming 2.57% of the average American’s annual income. Your individual car insurance rate depends on personal characteristics, so it will likely differ from the national average. Several factors that impact your car insurance include things like credit score (in most states), vehicle make and model, driving record and the characteristics of drivers insured on your policy.

Credit Score

Policyholders with high credit scores tend to file fewer claims than policyholders with lower credit scores. For that reason, car insurance companies in most states use your credit-based insurance score to help determine your premium. One way to lower your car insurance premium is to improve your credit score. On average, drivers with excellent credit pay a shocking $1,146 less per year for their car insurance than policyholders with poor credit. Note that the use of credit as a rating factor is prohibited in California, Hawaii and Massachusetts. In Michigan, while insurers are not allowed to use your credit score as a rating factor, they can use some of the information that contributes to your credit score to rate your policy, such as a history of missed or late payments.

Standout statistics:

      • Wisconsin drivers carrying full coverage car insurance experience an average rate increase of $4,128 — the highest of any state — when their credit score goes from ‘good’ to ‘poor.’
      • Of the states that use credit-based insurance scores as a rating factor, North Carolina drivers experience the lowest average increase on full coverage car insurance — only $351 — when their credit score goes from ‘good’ to ‘poor.’

Vehicle Choice

Your vehicle choice significantly affects your car insurance rate. On average, the cheaper your vehicle, the lower your car insurance rate will be. Typically, sedans are cheaper to insure than coupes or SUVs. Luxury vehicles, sports cars and vehicles equipped with advanced technology will likely be much more expensive to insure than a basic sedan. For instance, for full coverage car insurance, it costs $747 more per year to insure a luxury BMW330i than a Ford F-150 truck.

Generally, the safer your vehicle is, the cheaper it will be to insure. If a vehicle comes equipped with top-notch safety features, drivers may see lower insurance rates — although it will depend on how expensive those safety features are to replace. Expensive sensors and cameras can drive your car insurance cost higher in some cases. In addition to safety features, your vehicle’s weight has a bearing on safety. Heavy vehicles are more likely to protect the passengers and driver, which could help lower insurance costs. However, heavy vehicles can also cause significant damage to another vehicle in an accident, which could increase premiums. As a result, you may see heavy vehicles like the Ford F-150 with average rates around the national average, rather than much higher or lower.

If you’re on the hunt for a new vehicle, you may want to compare the following car insurance averages. While your actual rates will differ, these rates offer a starting point for comparison.

Driving record

Your driving record significantly impacts your car insurance rate, since insurance companies often see a poor driving record as an indication that you’re likely to file a claim in the future. An at-fault accident can drive up your rates considerably, but of any incident, a DUI on your record increases your rates the most. Drivers with a DUI pay an average of $1,650 more per year for their full coverage insurance than the national average. After an incident, you may want to check with your car insurance provider to see if it offers discounts for participating in a telematics program or a driver’s safety course.

Standout statistics:

      • After getting into an at-fault car accident, Rhode Island residents see the lowest insurance rate increases of any state, with an average added cost of only $50 per year.
      • California drivers see an average annual rate increase of $1,436 after an at-fault accident, the highest of any state. And Los Angeles drivers experience an average increase of $1,636 per year after causing an accident, the highest of any metro area we analyzed.

Teens

Life events may also affect your car insurance rate. Adding a teen to your car insurance policy can cause one of the most significant rate increases for the average driver. And, in many states, your marital status can affect your car insurance rates. Married drivers pay an average of $103 less per year for full coverage car insurance than the national average. However, married couples with a teen on their policy pay an average of $1,998 more than the national average.

Standout statistics:

      • After Hawaii, which does not use age to calculate insurance premiums, Iowa drivers see the lowest average annual premium increase when adding a teen to their car insurance policy, with a total increase of just $1,034 per year over the state’s average annual rate of $1,254.
      • Of the metros analyzed, Portland has the lowest average annual rate increase after adding a teen driver, at just $1,827. Meanwhile, Miami has the highest average rate increase of $3,891 per year after adding a teen driver.

Relocate in your metro

Car insurance rates may vary between ZIP codes in the same metropolitan area, since factors like crash statistics and cost of living vary between neighborhoods. For instance, Hopkinton, Massachusetts lies 30 miles west of Boston, and its distance from the city likely contributes to lower crash rates and a lower cost of living than neighborhoods like South Boston or North End. However, before relocating to a different ZIP code, you may want to consider your commute costs. Will you save money on your car insurance but pay more in gas and vehicle maintenance costs?

You may save even more by relocating to a different metro in your state. For instance, Florida drivers who live in Miami spend an average of 1.84% more of their income on car insurance than Orlando drivers. Car insurance alone may not be a sufficient reason to relocate, but if you’re already considering a move, you may want to consider the true cost of car insurance in each metro.

Section 3: The Current and Future State of Auto Insurance

Key factors may disrupt the auto insurance industry in 2022 and beyond. Broader shifts in the economy — like historic inflation increases, pandemic-induced supply chain disruptions, and international sanctions affecting gas prices — may have the most immediate effect on consumers’ wallets.

This article also appeared on: https://www.bankrate.com/insurance/car/the-true-cost-of-auto-insurance-in-2022/

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