When it comes to getting car insurance, most of the people in the US buy it because it has been deemed mandatory by their states. The minimum insurance you need to buy varies from state to state. But the question here is whether one should get only the minimum required insurance or should go for something better. Accidents happened unannounced. No one ever thinks that it will happen to them, but once must never rule out the possibility. That is why it is important for you not just to buy the minimum insurance but to get an insurance policy that will cover you completely in the event of an accident.
When it comes to buying insurance, there are several kinds of insurance out there that cover different types of damages. These include Liability coverage which covers bodily injury and property damage of the victim of an accident caused by you. This insurance is mandatory in most states. Comprehensive coverage protects you from things like theft, vandalism and in some cases even natural disasters. This coverage is mostly optional. Another insurance coverage is Uninsured motorist insurance which covers you in the event of getting hit by an uninsured vehicle. It is mandatory in some states while in others, it is optional. Collision coverage is another insurance policy that pays for the physical damage of your car the property damage. And Personal injury coverage covers your medical expenses after the accident. These are some known insurance coverage from which you can choose. All these coverage have different rates, and the price will also vary depending on the package you are opting for. But what really makes auto insurance expensive or cheap? In this article, I have mentioned a few factors that affect car insurance rates.
Your Age
If a teenager is going to get car insurance with his dad and they both have selected the same kind of coverage, they would still have to pay different amounts for it. The reason behind this is simple; the younger you are, the more expensive your auto insurance will be. There is a significant difference between the insurance premiums of a 50-year-old person and a 16-year-old person. Young people in the US are usually more careless when they are driving. And every year the majority of road accidents are caused by young people. If you compare the premiums of a 16-year-old with 50 years old, you can see that the annual difference in the amount paid is around $6000. For insurance business, young people are the riskiest clients, and that is why they are charged so highly. If you compare the premiums of the famous insurance company Allstate, you can see that they are charging 16-year-olds $4400 while they are only charging $950 for age 50. So be prepared to pay more if you are in the younger age group.
Credit Score
While a lot of people may not even know about it, but your credit score is very important when it comes to getting an auto insurance policy. A person that has good credit will be charged less while a person with bad credit will have to pay more. The reason behind this does not have anything to do with your credits directly. The reason behind people with bad credit have to pay more is that bad credit drivers make more claims. Studies show that not only the people with bad credits made a lot more claims, but whenever they made those claims, they were pretty expensive. So, if you have bad credit instead of getting expensive insurance, you should first improve your credit if you can and then apply for it. In some cases, people with bad credit are even paying double of what people with good credit are paying.
Driving Record
Your driving record also plays an important role in determining the price of your insurance policy. If a person has too many driving violations and has made claims in the past as well, they will not be charged the standard price for the insurance. If you have committed a strict driving violation in the past 3 to 5 years, you are likely to get charged a higher price. People who have been charged with Driving under the influence (DUI) in the past will also get charged more. In the state of California, a person who has driven under the influence can be up-charged on their insurance for ten years. If you have been charged with DUI in the recent past, you should get a San Jose DUI Lawyer to set your record clear. Other major driving violations include driving with a suspended license, hit and run, reckless driving, refusing to submit chemical tests, and racing. People who have committed a hit and run gets charged the most on auto insurance followed by a refusal to submit chemical test and DUI. People who have at-fault accidents on their record gets charged the least among these. However, if you want to buy comprehensive coverage, you would not be charged extra for that even with the violation. That is because compression coverage pays only for the events that were out of the driver’s hand. In some cases, even if you were not at fault in an accident, you still might get charged extra.
Your State
Every state in the US has different requirements for auto insurance that you need to meet. And the rates for all the insurance coverage also varies from state to state. It can depend on several different factors. For example, someone who lives in an area where more claims are made will be charged higher. While in an area where claims are made less one can easily find cheaper auto insurance package. The legislation of the state will also change the price of the insurance. In some states, you will only find an itsy bitsy difference while in other states, the difference is jaw-dropping. The most expensive states include Michigan, Louisiana and Florida. While the top three cheapest states are Maine, Idaho, and Ohio. California and DC are also among the most expensive states. Let’s have a look at some of these states:
Michigan
The people living in Michigan are paying 80% more of what the people in the other states are paying, which easily makes it the most expensive auto insurance state in the country. There are three main reasons why insurance in this state is significantly expensive. The first reason is that the state requires you to buy no-fault insurance that has never-ending Personal injury coverage. Secondly, the insurance offered in Michigan is of a high standard, which attracts insurance frauds and health-related bills. Litigation bills are also one of the reasons for it being expensive. The third and the last reason is that the premiums on the insurance offered by them are extremely high. The neighbor states of Michigan, I.e. Ohio, Illinois, Wisconsin, and Indiana, are significantly cheaper.
Florida
Florida ranks #3 on the list of most expensive auto insurance coverage in the US. The six month premiums in the state are as high as $1100, which is around 40% higher than what people in other states are paying. Due to its location, Florida faces regular floods and hurricane and insurance companies have to pay a heavy amount whenever a car is damaged in such events. They have to balance their profit to loss ratio as well so that is why they charge more than other states.
Another thing that contributes to the rate is no-fault insurance. Just like Michigan, you have to get no-fault insurance in Florida as well. However, you do not have to get the unlimited one but a minimum of $10,000 for Personal Injury Protection is required. The closer states of Florida are much cheaper. In Alabama and Georgia, you have to pay 40% less for a six month premium.
California
One of the most populous states in the US is also one of the most expensive when it comes to buying auto insurance. Currently, it is the seventh most expensive auto insurance state in the US. The six-month premium you have to pay there can be as high as $1000. Which is still a lot higher than the average premium paid by the citizens of other states. But the reason for California being expensive is not as same as Michigan or Florida. California has no laws that make it mandatory for you to get no-fault insurance and pay a heavy fee for Personal injury protection. The reason behind it being expensive is that the state has a high population. California makes more claims than any other average state, which drains the profit of insurance companies. And it is not just true for California, any city in the US that has a high population is likely to charge you more for insurance. The more the population is the more the chances of an accident are. However, the price of the coverage also depends on your insurance company. So, you would still be able to find some insurance packages that will be cheaper than the standard state packages. But make sure that you are meeting the minimum requirements set by the state.
