What You Should Know Before Choosing the Cheapest Auto Insurance Rates
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UPDATED: Jul 8, 2021
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Automobile insurance is required in every state in the U.S. and the District of Columbia. The minimum insurance requirements include liability coverage, in case you are involved in an accident causing injury to one or more persons, or damage to property.
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Auto insurance companies often advertise rates for insurance that just meets their state’s minimum required coverage, in an effort to entice shoppers to walk through their doors.
However, the minimum coverage amounts in your state are generally not going to be enough to provide you and your family adequate protection in case of an accident.
You Get What You Pay for
Auto insurance is similar to most consumer goods; you generally get what you pay for. If you buy minimal coverage, your premium rates will certainly be lower than most.
However, one single accident could cause serious financial hardship or worse, should you be sued for damages and required to pay more than your insurance company will cover.
Most states’ average liability requirements only provide $20,000 or $25,000 worth of coverage for a single accident-related injury, far less than the average cost cited below!
You certainly have the option to buy the least amount of liability coverage at the lowest price possible, but you may not like the results if you have the misfortune of being involved in an automobile accident.
Statistically, you may be far more likely to be involved in a traffic accident than you imagine.
According to the National Highway Traffic Safety Association (NHTSA) , there were more than 5.4 million traffic accidents reported to police in 2010. Of those reported, almost 30%, or 1.5 million, resulted in injuries.
The balance caused only property damage.
In addition, the NHTSA estimates that more than ten million accidents go unreported every year.
What Accidents Really Cost
As a nation, we pay more than $164 billion each year for motor vehicle accidents. That works out to an annual cost of $1,051 per person, according to a report filed by the AAA and reported on by CNNMoney.
According to reports by the AAA, (the Automobile Association of America) which cites studies by the Federal Highway Administration, each auto accident-related injury in the U.S. costs taxpayers an estimated $68,170.
In 2005, the average cost of a traffic fatality was $3.2 million, according to a report filed by the Rocky Mountain Insurance Information Association. Most experts agree that, to be safe, motorists should carry minimum liability coverage of 100/300/50.
With umbrella policies, many drivers extend their coverage to $1 million or more.
Other Coverage You May Want to Have
So far, all we’ve talked about is mandatory liability coverage for your automobile. There are several other coverage options that you should consider before making a final decision on auto insurance.
Collision and comprehensive coverage may both be worthwhile to have in the event that your car is damaged by vandals, in an accident for which you are at fault, or by other causes.
Collision coverage may also be a requirement of your bank or finance company if you’ve taken a loan out to purchase the vehicle.
Comprehensive covers mishaps, from broken windshields to dings and dents suffered by your car, due to acts of nature or other unforeseen circumstances.
Automotive repairs are expensive, and this coverage can be a lifesaver for you and your car.
Other coverage you may want to consider includes: PIP, or personal injury protection; medical coverage that supplements your own health insurance policy; rental car coverage if your car is laid up for covered repairs; and roadside assistance for the times you get stuck in a snow bank, blow a tire, lock yourself out of the car, or run out of gas.
Where You Live Affects Car Insurance Rates
Insurance rates will be determined, in part, by where you live. If you reside in a heavily populated urban area, you will pay significantly more for car insurance than if you live in a relatively secluded rural setting.
Insurance rates may vary dramatically state-by-state and city-by-city.
Drivers who live in densely populated cites, such as New York, Chicago, or Los Angeles, will pay much for their car insurance than motorists who live in the middle of Wyoming, North Dakota, or Idaho.
According to the Insurance Research Council, in an article published online by AOL Daily Finance, Michigan is the most expensive state for purchasing automobile insurance. The average annual premium in that state is $2,541.
The IRC study averages coverage from six car insurance providers in each state. The survey uses a model of a typical middle-aged driver, with an average vehicle and a 12-mile daily commute to their workplace.
Rates are based on liability coverage of $100,000 for one person, $300,000 for two or more people, and $50,000 for property damage.
The next most expensive states in the survey are: Louisiana with an average insurance cost of $2,453 per year; Oklahoma at $2,197; Montana at $2,190; and Washington, D.C, with an annual average auto insurance premium cost of $2,146.
Although Michigan is only 17th in the nation for its number of uninsured motorists, the state finished number one in this survey because it is the only state that does not cap payments for personal injuries suffered in a motor vehicle accident.
In Michigan, after an insurance provider has paid out $500,000 in claims, three years of lost wages, and property damages for a single accident claim, a separate non-profit, quasi-government agency will finally step in and pick up the balance of the tab.
Michigan drivers pay the price of this largesse with the highest insurance premiums in the nation.
The states with the lowest typical auto insurance costs are: Vermont, the only state lower than a thousand dollars, at $995 per year; South Carolina at $1,095; and Maine at $1,126.
The state of Wisconsin follows closely with just $2 more, at $1,128, and then it’s Tennessee, at $1,146 per year.
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Uninsured Motorists Abound
Other than Michigan, states with high percentages of uninsured motorists typically require higher car insurance premiums than states with lower numbers of drivers who carry no insurance.
Leading the pack in this category is New Mexico, where, according to 2007 statistics, a full 29% of drivers had no car insurance.
Mississippi is next, with 28%, followed by Alabama at 26%, Oklahoma with 24%, and Florida at 23%.
The state with the fewest number of uninsured drivers is Massachusetts, where just 1% of licensed drivers are without car insurance.
Maine boasts that just 4% of motorists are uninsured, while North Dakota and New York are tied with 5% of all motorists driving uninsured in both states. Rounding out the top five is Vermont, where just 6% of drivers have no auto insurance coverage.
Some Cars Are More Expensive to Insure
The kind of car you drive will also help to determine what the cheapest car insurance rates are. The least expensive vehicles to insure are usually family cars and minivans like the Toyota Sienna and Sienna LE models.
Annual insurance rates for these two vehicles are just $1,111 and $1,114 respectively. Next are the Jeep Patriot and Compass Sport models at $1,116 and $1,118.
The most expensive cars to insure, as you might expect, are expensive foreign imports and sport coupes. Leading the pack is the Audi R8 Spyder Quattro Convertible, with an annual insurance cost of more than three times that of a Toyota minivan–$3,384!
Two pricy Mercedes models follow the Audi, the CL600 coupe and the S600. The CL600 will cost an average of $3,300 per year to insure; the S600 only $2,948. If you intend on driving an Audi sport coupe, a Porsche, or any Mercedes, cheap car insurance is not in the cards.
Who You Are Matters
According to Time Magazine, poor people pay more for car insurance than more affluent motorists.
In a recently released study by the Consumer Federation of America, analysts conclude that, by considering a person’s education, occupation, location, and credit history, poor people are considered to be higher insurance risks and will pay larger premiums.
States prohibit companies from taking race or income into consideration when determining insurance rates, but the factors listed above make it very difficult for economically challenged (and, very often, minority) citizens to get a break on auto insurance rates.
Some experts argue that poor people drive far less than average, since they have less money for gasoline and vehicle maintenance, and therefore should be considered lower risk drivers.
Without the ability to afford a vehicle, the poor are at a significant disadvantage in terms of financial opportunities and are restricted as to where they can find work, shop, or go to school.
Safety Is a Major Concern
In conclusion, statistics show that almost 43,000 people die each year as a result of traffic accidents. However, according to AAA President Robert Darbelnet in that previously mentioned article on CNNMoney.com, most drivers are unaware of the terrible cost in human life.
Darbelnet believes that Americans have become culturally complacent in regard to injury accidents and highway deaths. He believes that this attitude needs to change and that Americans need to focus more on safety, realizing that a serious auto accident can happen to anybody.
While accidents can’t be prevented, if you are going to drive a motor vehicle, it is important that you have adequate insurance coverage.
Auto insurance premiums can indeed be economical. It is important to shop for the best prices, but motorists should be warned not to skimp on coverage.
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