Best Car Insurance Rates for 2021
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Our financial experts provide you with everything you need about finding the best auto insurance rates, quotes, and coverage.
Get the Best Rate on Your Auto Insurance
For many, auto insurance is something they think about – but do nothing about. You may have had the same insurance coverage for years, but as your wealth and family grows, are you fully protected from what could go wrong?
Auto insurance protects your car and your assets if you’re involved in a motor vehicle accident, and it’s required to drive in every US state. How much insurance you need is based on several factors, including your budget, what type of car you drive, and your personal habits.
Before you get an auto insurance quote, here’s everything you need to know about getting the most from your insurance company.
How Auto Insurance Quotes Work
Not all auto insurance quotes are the same. While you may get a high price from one company, another might provide the same coverage for less. It’s important to get multiple quotes to find both the best possible price and coverage for your cars.
In today’s world, most auto insurance quotes begin with an online search. While you can get most quotes online, you may have to call independent insurance agents to get quotes from smaller or specialized insurance companies.
What Information is Required For an Auto Insurance Quote?
When you ask for a new auto insurance quote, the insurance company requires information about the cars that will be insured, as well as the drivers in your household. You will need to provide your driver’s license number, social security number, and the approximate number of miles you drive to work each day.
From there, the insurance company will put together your auto insurance quote based on several factors. The primary factors include your car’s year, make, and model, as well as where it’s parked every night. The type of car you drive and your neighborhood play large roles.
In addition to pulling up your driving record, the insurance company will likely run a soft credit check to determine your consumer profile. The insurer may also pull a special credit score (called an insurance score) to determine how much risk you present to the company.
What Coverage Limits Do You Need?
If you get in an accident or severe weather damages your car, you will need to file a claim to take advantage of your benefits. However, your insurance will only pay up to a certain amount.
Coverage limits refer to the maximum amount that the insurance company will pay for a covered incident (which falls within the bounds of your policy).
According to the Insurance Information Institute (III), most insurance plans cover collision damage, property damage, bodily injury liability, and medical payments for yourself and others involved in the accident. Conversely, auto insurance policies won’t cover maintenance costs nor will they cover the difference between the loan amount and appraised value if your car is totaled in an accident. In addition, auto insurance policies may not cover your car if someone borrows it with permission.
For example: In the rare – but not unheard of – event that you hit a cow that escaped from a nearby farm, you may only be covered if you have comprehensive insurance. If you don’t, you may have to track down the owner and negotiate directly for damages to the vehicle (and the cow).
How to Find the Best Car Insurance For You
When it comes to auto insurance quotes, there is no “one-size-fits-all” approach. Everyone’s needs are very different and quotes are based on your driving history, the car you drive, and your personal driving habits.
Be Ready to Discuss Your Driving History
When putting together your auto insurance quote, the two biggest factors in your control are the vehicle you drive and your prior driving record. If you have a clean record without accidents, zero traffic tickets over the past seven years, and/or no insurance claims from other incidents, you may qualify for excellent rates. If you have a couple of tickets or even an accident, however, you’ll likely see a higher insurance premium.
The Car You Drive Matters
Insurers will also look closely at the car you drive. When putting together an auto insurance quote, they will look at the car’s safety ratings and how much it would cost to repair (or replace) the vehicle after an accident.
For example, a 2019 Ford Escape will likely be cheaper to insure than a 1970 Pontiac GTO, because of easier-to-find parts and experienced mechanics.
Understand Vehicle Features That Influence Insurance Costs
Insurance relies heavily on statistical information to make judgments about the risk of insuring against loss. Vehicles with a lower safety rating may be more expensive to insure because they present more risk of injury to the driver and the passengers inside. Vehicles with key safety features (like side curtain airbags and blind spot warnings) may cost less to insure because they present less of a risk to drivers and passengers.
Another issue that could drive up your insurance is theft frequency. The National Insurance Crime Bureau collects two sets of data about theft: the most frequently stolen vehicles every year and cities that report the most stolen vehicles.
According to the 2019 NICB “Hot Wheels” report, the Honda Civic and Honda Accord were the most commonly stolen vehicles. Rounding out the top five were Ford pick-up trucks, Chevrolet pick-up trucks, and the Toyota Camry. Owning one of these vehicles may carry higher insurance premiums, simply because the risk of theft is higher.
How Driving Habits Affect Insurance Costs
Even if you have a perfect driving record and a car that’s unlikely to be stolen, your driving habits could affect how much you pay for your auto insurance policy. Every time you get behind the wheel, insurance companies consider that a risk — not necessarily from the way you drive, but from how everyone else drives around you.
For example: Someone who has a long daily commute to work will usually pay a higher premium than those who have a shorter commute. This is because more hours on the road puts them at a higher risk of getting in an accident from their drive time, fatigue, and even distraction.
Your premium can also increase based on where you live and the driving habits of those around you. According to the Allstate America’s Best Driver Report, the worst cities to drive in are Baltimore, Washington DC, Boston, Worcester (MA), and Glendale (CA). Drivers in these cities file twice the auto insurance claims than the national average and are forced to hard-brake more often than other drivers. The result? Higher premiums for everyone calling those cities home.
Review the Types of Auto Insurance Coverage
Car insurance doesn’t just cover your car if you get into an accident. Rather, it can also cover medical bills for yourself and passengers – and even damage to property caused by your car. Depending on where you live, most insurance policies will offer six areas of coverage.
1. Bodily Injury
Bodily injury coverage provides financial protection for you and other covered members of your household who may be involved in an accident while driving. This coverage usually extends to the vehicles you own and are on your policy. It also pays for medical care and injuries sustained by people in the other vehicle(s) involved in the accident.
2. Personal Injury Protection/Medical Payments
Personal injury protection (also known as PIP or “no fault”) covers the cost of medical treatment, lost wages, and sometimes funeral costs for the driver and passengers in the policy holder’s vehicle. Policy limits for PIP are set by state law and some states require that all drivers maintain a minimum amount of PIP coverage.
In most cases, if you’re in an accident, your auto insurance policy’s PIP coverage is first initiated to cover your medical treatment. Once exhausted, your health insurance policy will cover the remainder of your care and treatment.
3. Property Damage Liability
Property damage liability covers the cost of damage that drivers cause to someone else’s property. If you hit a fence or mailbox, property damage liability provides reimbursement to the owner of the fence or mailbox. Likewise, it also covers the cost to replace powerlines, telephone poles, or street signs damaged in an accident.
Collision insurance covers any damage done to your vehicle in an accident. All policies have a deductible on the collision amount (which is the amount that the policyholder is required to pay before the insurance company pays anything). Deductibles range from $250 to $1,000. The higher the deductible, the lower the insurance premium.
Collision insurance covers the vehicle no matter who is at fault for the accident. If you’re at fault, you’ll pay the deductible before the insurance coverage pays for the repairs. If you’re not, the insurance company may request that the other driver’s insurance company pay for your vehicle’s repairs.
While comprehensive coverage is optional in all states, it is required by the bank or lender financing your car. It covers damage to a vehicle from sources other than an accident with another vehicle (e.g. a tree falling on your parked car, hitting a deer on the highway). Deductibles are usually between $0 and $500.
If you have an older car or are no longer paying down a car loan, you may wish to forgo comprehensive coverage.
6. Uninsured and Underinsured Motorist Coverage
This coverage protects the policyholder, driver, or a family member if they are involved in either a hit-and-run accident or an accident with an uninsured vehicle. Uninsured motorist coverage also provides assistance if you’re a pedestrian involved in a hit-and-run accident.
If you’re involved in an accident with another vehicle – and the other driver has insufficient coverage to pay for damages – your policy’s underinsured motorist coverage may make up the difference.
The amount of coverage you should carry is set by several factors. These include state law (which may include minimum amounts as well as the type of coverage required to own and operate a motor vehicle), your personal assets, and your budget. The more coverage you have for your car, the bigger your annual auto insurance premium.
While your insurance company may offer the minimum coverage required by your state to meet the basic minimums, it’s always wise to carry more than the minimum. Holding more insurance can protect you from paying for a wide range of expenses should you get into an accident, including the medical bills of others involved and the replacement cost of your car.
Maximum coverage limits also vary by state, with some setting a cap on liability coverage between $300,000 and $500,000.
How Much Insurance Do I Need?
The price of auto insurance is a delicate balance between how much coverage you want and how much you can afford to pay out of pocket.
First, consider the minimum insurance your state requires you to carry. Although minimum coverage will keep you “legal” while on the road, it may not be enough to cover all your expenses in the event of an accident.
Second, take stock of your cars. If they are older – and you aren’t paying a loan on them – you may be able to save money by not paying for comprehensive coverage. If you get in an accident without comprehensive coverage, however, your insurance won’t pay out the value of your car to replace it with a new one.
Finally, consider the out-of-pocket costs you could afford after an accident. If you’re building your savings and can’t afford to pay medical bills and damages after an auto collision, you may want to carry more insurance. If you’re financially stable and aren’t worried about replacing a vehicle, paying for medical bills, or covering property damage, you may be able to save money by reducing your level of coverage.
Auto Insurance and Umbrella Policies
For most drivers, state maximum coverage limits are sufficient to protect assets in the event of an accident. But for those who own a home, multiple vehicles, vacation properties, or other significant financial assets, adding an umbrella policy to their insurance coverage may be a smart move.
An umbrella policy offers additional protection if you’re in a complex accident with multiple vehicles or an expensive accident involving multiple drivers and/or destroyed property. These incidents can quickly exceed auto insurance coverage limits.
In one of these situations, an umbrella policy could help you pay the additional amount owed beyond your coverage limits. Once your car insurance policy pays to its limit, the umbrella policy pays the rest. According to the Insurance Information Institute, a $1 million umbrella policy costs on average between $150 and $300 per year.
How to Shop for Auto Insurance
Before you start shopping for auto insurance, consider the following information:
Your Location Affects Pricing
Because different states have different minimum insurance requirements, the average insurance rates where you live may vary.
According to a recent analysis by Business Insider, New Hampshire was the state with the highest average car insurance rates ($1,534). On the opposite side of the spectrum, Missouri residents had the lowest average annual premium ($1,193).
Across the country, annual insurance premiums can range from a low of $775 to over $3,000. By researching how much the annual average car insurance premium is in your state, you can ensure the best possible price.
Balance Cheap Auto Insurance with Necessary Coverage
As you look at the numbers above, it’s tempting to go to the cheapest company and get the least expensive policy. But the lowest possible cost can result in the lowest possible coverage, and that can come back to haunt you should you get into an accident.
Consider Who You Purchase From
It’s a great concept to pay minimal amounts on car insurance. That said, regardless of how you drive, you’re still taking a significant risk if you opt for the minimum required coverage from the cheapest companies. A company’s reputation, history, and customer service should weigh in on your decision along with price.
Many companies who offer low premiums are able to do so because they avoid paying policy holders’ claims at all costs. They may have a high record of denying claims or poor customer service. Before choosing a cut-rate insurance policy, check Better Business Bureau ratings and online reviews to see what others are saying about these companies.
Another consideration is a low introductory premium that may hide high costs later on. Companies that offer low premiums may do so for new policy holders, then increase their premiums dramatically in subsequent years. Some companies will utilize this tactic because they know policy holders are reluctant to change companies. Again, check online ratings and customer comments to spot any potential pricing red flags.
Get an Auto Insurance Quote (or Two!)
Now that you’ve learned so much about auto insurance, it’s time to start getting quotes. Use the following comparison sites to find the best rate for your coverage needs.
According to the 2020 J.D. Power US Auto Insurance Study, three insurance companies were consistently ranked among the best across the country: Allstate, GEICO, and State Farm. These three were given high ratings by consumers based on several factors, including their billing process, customer service, claims process, and prices.
While these three were the top-rated companies, that doesn’t mean they’re ideal for everyone. While some companies only offer insurance in certain states, others may charge higher auto insurance premiums. It’s important to get multiple quotes from both major insurance companies and smaller insurance agents to determine the best options for you.
Who Has the Best Home and Auto Insurance Bundle?
When it comes to home and auto insurance, many factors affect the prices and discounts offered by insurance bundles. These can include your home’s location and value, your credit history, driving record, and the make, model, and year of the car(s) you are insuring. Taking all of these into account, the best discounts from bunding your insurance may be obtained from Allstate, Progressive, and State Farm.
Allstate leads the list of discounts for bundled insurance with a long list of potential discounts that can add up to a substantial amount off of your policies. Progressive rewards customers with 10% off of their policies when they bundle them together. State Farm offers a flat discount with the amount depending on the premium costs.
Who Has the Cheapest Auto Insurance?
According to U.S. News, USAA offers the cheapest auto insurance. Their rates are, on average, $300 cheaper than other companies for comparable policies. To receive insurance through USAA, you have to either be an active military, military reservist, veteran, or in the National Guard or Air National Guard.
For insurance policies open to everyone, GEICO was rated the cheapest. On average, the company offers rates are approximately 17% less when compared to similar policies.
Your Frequently Asked Questions About Auto Insurance
InvestingAnswers is on a mission to help consumers build and protect their wealth through education. That is why we have experts answering your pertinent questions at the end of each article.
How Much Does Auto Insurance Cost?
According to the Insurance Information Institute, the average insurance policy for medium-size sedans costs drivers $1,251 per year (or $104.25 per month). The exact amount of your policy premium depends on many factors, including the amount and type of coverage you purchase, your age and driving history, and your car’s make, model, and age.
How Do You Switch Car Insurance?
If you’re thinking about switching your car insurance, consider whether it’s the right time to do so. If you’ve got several months to go on your policy before it expires, it may be easier to wait until the end of your current policy term to switch to a new company. Double check your current policy to see if there are any penalties for early cancelations.
If your home and auto coverage are bundled, check to see if “unbundling” your insurance increases your home insurance premiums. A quick call to your insurance company may be all you need to confirm the final price for your home insurance (should you decide to take your auto insurance coverage elsewhere). Insurance companies offer discounts if they know you’re moving your business to a competitor – they may come back with a far better rate.
After exploring your options and selecting a new insurance company, confirm the starting date of your new policy with the insurance company. Once this is confirmed, call your current insurance carrier to cancel your policy. Tell them the effective date of the new policy. There should be no lapse in coverage between your old policy and your new one.
Once you have your new policy confirmed, print the ID cards, then place one set in your vehicle and another set in a safe place at home.
Is It Better to Pay for Car Insurance All at Once?
In general, yes. Many companies offer a discount if you pay your annual policy premium in full rather than monthly. As always, review the payments offered by your insurance company and compare. If you can save money by paying in one sum, then it’s worth it.
What Are Common Car Insurance Discounts?
Insurance companies offer many discounts. Some of the more common car insurance discounts available include bundling home and car insurance together, “safe driver” discounts, and paying for the full year’s policy upfront. These three discounts alone can potentially save you hundreds of dollars per year on insurance.