Want to pay less for car insurance? Find out how much you should be paying and how you can cut your premiums further.
The price gap between different car insurance providers is widening, and a lot of Americans are suddenly being hit with car insurance price hikes. It’s bad news, but the silver lining is that you can now save impressive amounts of money by switching car insurance, to the tune of hundreds of dollars per year. Competition between brands has lead to an increase in discounts and other bonuses on new and existing policies.
The average cost for car insurance across the country is around $800 per year. For male drivers under 25, the cost is likely to be over $1,000 a year, and for middle-aged married drivers with clean records it could be as low as $600 or $700.
This guide breaks down the average costs of car insurance and how car insurance costs are calculated by a provider. Find out the different ways to save and take full advantage of them.
Your individual circumstances, your car and the policy you choose will affect the price you pay for car insurance. You can’t draw up your own policy and set your own prices, but you can take control of many of the factors affecting the cost of your car insurance, and reduce costs that way.
Compare rates from these car insurance providers
Who’s the driver?
Insurance providers want to know a few things about you to set prices.
- Age. Young drivers under 25, as well as seniors, will pay more for car insurance. Drivers under 25 — and especially male drivers under 25 — are believed by the insurance industry to be at high risk for car accidents. This means the older you get, the lower your car insurance rates will tend to be, until you reach a certain age.
- Sex. Males can often expect higher premiums. This is sometimes further modified by age and marital status.
- Driving experience. L platers and P platers typically pay more, which often compounds the effect of age on premiums.
- Occupation. Professional drivers, whether behind the wheel of a racecar or a delivery truck, can expect significantly higher premiums thanks to more time spent on the road.
- Marital status. Single people are seen as less stable than their married counterparts. If you get married, you’ll see your premiums decrease right away.
- Location. Some places are at higher risk of theft, vandalism and other potential hazards, which incurs higher costs. Urban drivers are at higher risk for an accident than people who live far outside the city limits. Similarly, if one area is more prone to flooding or storms you may expect this to impact your premiums.
- Claims history. The more car insurance claims you have made in the past, the higher your premiums will generally be.
- Driving record. The more violations you have on your driving record, the more you can expect to pay for your car insurance. If you’re notorious for speeding, driving under the influence or trying to start a drag race at every red light, your insurer will likely know about it and raise prices accordingly.
- Credit score. Like it or not, nearly all auto insurance providers use your credit score to help calculate your risk before arriving at a policy cost. This is because multiple independent studies indicate that if your credit score is low, you’re more likely to be involved in an accident. Credit score is one of the largest factors a provider uses to decide on a customer’s rate.
However, there are a few states where car insurance providers aren’t allowed to use credit to determine rates — California, Massachusetts and Hawaii. If you live in one of those states, your provider won’t be able to check your score before giving you a quote.
- Other drivers. Only certain people will be approved to drive the car, and all of them impact the cost. Even the world’s safest driver will get a substantial price hike by listing another less-safe driver on the policy.
- Typical driving habits. Your typical distance driven, how often you get behind the wheel and where you drive all play a part in your car insurance prices.
- Don’t make cheap claims. It might be cheaper in the long run to pay out of pocket for smaller expenses rather than claiming them on insurance. Maintaining a no claims history, or reputation as a safe driver, can make a substantial difference.
- Be careful listing other drivers. Spend less by only naming other drivers on the policy if they’re at least as safe behind the wheel as you are.
- Avoid infringements. It’s easier said than done, but a trail of traffic violations will follow you around and keep bumping up your car insurance costs.
- Match policy to use. Try finding a policy that suits your typical car use. For example, if you only drive six months a year as may be the case with collector or vintage cars, you can get a considerable discount by looking for lay-up periods and similar options.
What kind of car is it?
The total value of your car is one of the main price considerations. If there’s one outstanding tip for saving on car insurance, it’s to buy a cheap, safe and common vehicle.
- Manufacturer. Get lower prices with manufacturers that are popular in Australia and that have expansive service networks.
- Year, make and model. The availability of spare parts and approved mechanics are key factors for determining car repair costs, and subsequently car insurance premiums.
- Car security. Car microdotting, immobilisers, alarms and other anti-theft measures make a difference to overall risk, and will get you lower prices with some insurers.
- Car safety. The safer a car is for its drivers and passengers, the cheaper it is to insure. You can find the safest cars on the market by comparing official NHTSA safety ratings.
- Target of theft. Some cars are much more likely to be stolen than others, simply because they’re in style, or are easier to resell. A highly desirable car will often attract higher premiums.
- Where it’s kept. Whether a car is parked in a locked garage or on the street in a high-crime area will also affect the costs to insure it.
- Try aftermarket security. Even if your car was missing important security features when you bought it, you can still install aftermarket systems. VIN etching, for example, is relatively cheap but can make a big difference. Remember that not all insurers will recognise all security systems, so check in advance.
- Consider a big car. Larger vehicles are often safer for their drivers, mostly because they just tend to come out on top in accidents with smaller cars. This can translate into reduced premiums, but might not always be worth the cost.
- Buy a popular model. The more popular your car is, the lower the prices you can expect.
What type of insurance policy am I getting?
Every driver needs basic liability coverage, but depending on which other coverage you’re adding onto your policy and the policy features, you can naturally expect very different prices.
- Excess. The excess is an amount you will need to pay before claiming on car insurance, and a higher excess means lower premiums while a lower excess means higher premiums. You will often be able to choose your own excess.
- Additional options. Two similar-seeming policies might be very different side by side when you look at extras like roadside assistance, rental car replacements, emergency accommodation and vehicle storage, all of which can add to the cost of policies.
- Choose a higher excess. You should always be able to afford your excess so you can make claims if needed, but you might also consider keeping it high if possible in order to reduce your premiums.
- Drop extras. If you won’t be pulling a trailer, you probably don’t want a policy that makes you pay for trailer cover. Try dropping unwanted extras, or consider avoiding policies that are loaded with features you don’t need.
The cost of car insurance will vary depending on the factors above. The main ones like age, location and type of car can each make a difference of hundreds of dollars per year. The following tables show how much of a difference there is. Prices are calculated based on the average annual premiums of more than 15 insurers around Australia, rounded off to the nearest $10.
How much does car insurance cost for under 25s?
Drivers under 25 can generally expect to pay more for car insurance policies than any other group.
You can save money by taking control of the factors affecting your car insurance prices wherever possible, and can save even more by following some useful tips. With the cost of car insurance varying so widely, there are opportunities to save a lot of money.
- Drive safely. The better your driving record is, the lower your rates are going to be. You can enroll in a defensive driving class to save as much as 10% on your annual costs. These classes typically require half a day in a classroom, or following along with an online course, and cost $25-30 — that’s only the cost of half a tank of gas, or maybe lunch for two. Once your course is completed, you may even qualify to have violation points removed from your license, which can further decrease your insurance costs if your violation points were the cause for an elevated rate.
- Garage your vehicle. Parking in a suburban driveway or along a safe street won’t probably affect your insurance rates, but if you live in an area with high crime rates, your rate is likely to be higher. If you do live in an area that’s less safe for street parking, it could be worth the money to rent a garage spot. Other options to consider: you can install an antitheft system on your vehicle, making it less of an easy target for would-be thieves.
- Ask for price matching. Get in touch with your current insurer before taking your business elsewhere, and give them a chance to match competitors’ prices. Bring in a written quote from elsewhere and you may be surprised at how flexible and accommodating insurers can be.
- Consider trading in. You may be shopping for a new vehicle soon, and accounting for the potential insurance costs is a good idea for keeping overall costs down. Remember — a luxury car, a European import or anything high-performance is likely to drive up your car insurance rates. If you can afford a Ferrari, maybe insurance costs aren’t your chief concern, but you’re likely to see a lower rate by going with Ford or Honda over BMW or Jaguar.
- Buy online. A lot of insurers will offer considerable discounts for signing up online, as this goes a long way to reducing the insurer’s overhead costs.
- Review your coverage. Try not to go past a renewal period without reviewing your coverage and seeing if you could save money by switching. It’s not unusual for prices to creep upwards over time, and an insurer that initially delivered value for money might not be the right choice anymore.
- Adjust your options. You don’t have to cancel your policy or change insurers to save money. Renewal time also lets you adjust your policy options, including your chosen extras, excess and other factors.
- Hunt for discounts. Don’t underestimate the power of discounts in the long run. Look for discounts for having car security systems, multi-policy discounts with insurers you’re already a customer of, and generous no claims bonuses for safe drivers.
- Compare and switch car insurance. You won’t know whether you could be getting more value for money elsewhere if you never look, and you won’t actually get that value if you don’t switch. You can build bonuses over time by sticking with the same provider, but you shouldn’t hesitate if you know you have a preferable option waiting.