When it comes to car insurance rates, where you live matters.
The difference between the highest and lowest average annual premiums in the United States is $2,120, according to a recent Bankrate study that ranks states based on the “true cost” of auto insurance.
The study’s true cost ranking is derived from the average total percentage of income spent on auto insurance, based on the average income in each state, not just the average amount spent on premiums. Since average income varies by tens of thousands of dollars between states, the ranking is intended to better reflect the burden on drivers’ overall budgets.
Using this measure, the average cost of car insurance in the United States is 2.57% of a US driver’s annual income, with an average annual premium of $1,771 per year.
Below, check out the 10 cheapest states for annual car insurance rates, with a ranking based on their “true cost.”
- Average percentage of income spent: 1.87%
- Average annual cost: $1,249
- Average percentage of income spent: 1.85%
- Average annual cost: $1,449
- Average percentage of income spent: 1.68%
- Average annual cost $1,065
- Average percentage of income spent: 1.60%
- Average annual cost: $1,313
- Average percentage of income spent: 1.48%
- Average annual cost: $1,000
- Average percentage of income spent: 1.47%
- Average annual cost: $1,182
- Average percentage of income spent: 1.46%
- Average annual cost: $1,340
- Average percentage of income spent: 1.45%
- Average annual cost: $1,296
- Average percentage of income spent: 1.44%
- Average annual cost: $876
- Average percentage of income spent: 1.41%
- Average annual cost: $1,206
The ranking also reflects the many factors that contribute to auto insurance rates in each state, including your age, the car you drive, your driving record, your credit score (in most states), the length of your route and even local weather conditions.
Drivers in Louisiana and Florida spend the largest share of their income on car insurance: 5.26% and 4.42%, respectively. These rates are comparatively higher since these states have relatively low median incomes compared to other states. Weather could also be a factor, as hurricanes and flooding are common in both states, says Lizzie Nealon, the report’s author.
Other factors are also at play, to varying degrees.
On average, U.S. drivers with great credit scores pay nearly $1,500 less than those with poor ratings, according to data from Bankrate, but that can vary by state. In California, Hawaii and Massachusetts, insurers are not allowed to use credit scores to determine their rates.
Misbehavior also has a huge impact. Drivers who cause a car accident pay an average annual premium of $2,521 in the United States, but it can be much higher depending on where you live. In New York, for example, the average annual rate is $3,239 for drivers who cause accidents.
What you can do to keep rates low
“If you’re a driver in Louisiana, living there, probably working there, it would be pretty hard to just uproot yourself and move to Hawaii, where it’s the cheapest,” says Bankrate analyst Sarah Foster. who worked on the study.
Since some of the costs are out of your control, the best way to lower rates is to maintain good driving habits and keep your credit score as high as possible, especially in the majority of states where it is used to determine your car insurance rate, says Foster.
It’s also worth considering a new policy from time to time. Drivers often forget to periodically shop around for new fares, especially if their credit score has improved, Foster says. But insurance companies won’t necessarily adjust their rates before the renewal date, so it’s up to drivers to stay in control of their own policy.
“Even if a credit score is absent of any kind of change, it’s still a good idea to shop around and make sure you’re not paying extra for insurance that you could get for hundreds of dollars less. somewhere else,” says Foster. “Nobody likes to overpay for anything when inflation is at its highest level in 40 years.”
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