Advice

How to Estimate Car Insurance Costs Before Buying

By 03/13/2025 9:00am
Estimate car insurance

Car Insurance Quick Facts

  • The national average annual cost for full coverage car insurance premiums is $2,670.
  • Although liability car insurance is mandatory in every state except New Hampshire, collision and comprehensive coverage aren’t mandatory in any state.
  • Your address can make a big difference in the cost of your car insurance; for example, the average insurance cost in California and Florida is much higher than in Oklahoma and Indiana.

When trying to fit the total cost of a new or used car into your monthly budget, it’s critical to include not just the car loan payment but all costs related to that vehicle in your calculations. For example, you’ll need to estimate the cost of fuel, scheduled maintenance, expected repairs, and car insurance. Although it doesn’t affect your monthly budget, depreciation is a hidden cost of car ownership that will be very important when you want to sell or trade in that vehicle.

Some of these monthly costs are easier to put a number to than others. Car insurance is particularly tricky because many variables impact a monthly premium. Moreover, each insurance provider uses its formula to weigh those various factors to arrive at the cost of a policy based on your unique choice of vehicle and the level of risk you pose.

Our goal is to provide you with a description of many of the variables an insurer must consider when determining the price of underwriting the insurance on any individual. We’ve provided jump links if you want to skip ahead.

What Is Considered Full Coverage Car Insurance?

The cost of car insurance has been steadily rising. According to Bankrate, the average cost for a full-coverage car insurance policy is $2,670 nationally. This figure doesn’t include the 5% or more that experts believe it will increase during 2025.

Before we launch into how a car insurance company arrives at an annual premium, we should establish exactly what types of coverage that premium buys. Here again, there are scads of optional extras (riders) that can expand what is covered and boost the premium cost. Moreover, a few states may require some of these extras, like uninsured motorist or no-fault (PIP) coverages.

For our purposes here, we’ll stick with the big three: collision, comprehensive, and liability. They make up the bulk of the coverage and premium cost of the average car insurance policy. The odds are that your state requires some degree of minimum liability coverage. However, your state doesn’t require collision or comprehensive coverage if you don’t have a car loan or lease.

  • Liability: Unless you live in New Hampshire, your state requires you to have this coverage that helps pay for another person’s medical expenses in a crash in which you are at fault. Additionally, it helps pay for repairs or replacement of another person’s vehicle and property.
  • Collision: When you are in an accident with another car, motorcycle, or some other object, like a tree or power pole, collision coverage helps pay for the repairs or replacement of your car, minus any deductible. If you have an older car, you may consider dropping this coverage.
  • Comprehensive: Minus any deductible, this coverage helps pay for repairs or replacement of your vehicle if it’s damaged by an act of nature (hail or a falling tree), an animal, or vandalism.

PRO TIP: In the case of a total loss, your collision coverage only covers the current market (book) value of the vehicle minus the deductible. If you owe more than the book value, you are on the hook for the difference. We recommend adding a gap insurance rider to your policy to cover that difference.

What Can Make Your Car Insurance Cost Go Up or Down?

Car insurance premiums aren’t one-size-fits-all. It isn’t simply about the vehicle you pick and the amount of insurance you want (or is required) that determines the annual premium. Nope, calculating a premium is a complex formula unique to each insurance provider. Therefore, the same person insuring the same vehicle will get different quotes from different insurance companies. We’ve organized many factors an insurer considers into categories to provide an easier-to-grasp handle on what influences higher and lower premiums.

What Car Characteristics Cause Your Insurance Cost to Go Up or Down

It all begins with the vehicle that will be insured, right? It’s the starting point for calculating a premium and one of the more significant variables. Here are some of the more important criteria that will affect your rate.

  • Vehicle price: Generally, the more expensive your car is, the higher your premium will be. Why? The insurance company is responsible for repairs—up to the vehicle’s actual cash value—if it’s damaged in a covered loss and you carry comprehensive and collision coverage. The more your car is worth, the more they may have to pay to cover the car’s market value in the case of a totaled claim. So, the insurer will charge you more to compensate for that risk.
  • Repair costs: Cars that cost more to repair cost more to insure since your insurance company could be responsible for the repair bill. Let’s face it: It costs more to fix similar damage to a BMW than a Kia.
  • Car’s age: In general, newer vehicles are worth more than older ones unless the older one is a classic car. If the insurer declares the car a total loss, it’s on the hook for the car’s current market value. The newer the car, the more they’ll have to pay.
  • Vehicle make and model: Sports cars and other high-performance vehicles are built for speed. Driving a vehicle with more horsepower often leads to speeding, which increases the insurer’s risk. Furthermore, these types of cars usually have more expensive parts, making them more costly to repair.
  • Car body type: A larger and heavier car, including heavy electric vehicles, can cause more damage in an accident. So, some insurance companies charge higher rates for SUVs and trucks. 
  • Safety features. Some features that make cars safer by reducing the risk of accidents, such as antilock brakes and automatic emergency braking, may help lower your insurance costs. However, advanced high-tech safety features may increase the cost of your policy because they cost more to repair.
  • Antitheft features: You may qualify for a discount on your coverage if your car has antitheft features such as an alarm system, GPS tracking, or an ignition shut-off switch.

Do Electric Vehicles Cost More to Insure?

Yes, it will cost you more to insure an electric car. According to Bankrate, EVs cost as much as 18% to 30% more to insure than combustion engine vehicles. Why? That extra cost can be attributed to the generally higher purchase price, which translates into a higher replacement cost and the higher cost of repairs. Moreover, EV insurance claims are filed at a frequency rate 17% higher than combustion engine vehicles.

How Does the Insured Owner Cause Car Insurance Costs to Go Up or Down?

We know that you can impact the amount of your annual car insurance premium because of the vehicle you pick. However, you and your lifestyle also influence the premium amount. You have power over some of these factors to affect insurance cost, others not so much.

  • Age: The average swing in annual premium costs from age group to age group averages no more than a few hundred dollars. However, your age does affect what you’ll pay for insurance. Historically, younger drivers below the age of 25 pay the highest rates, with 25- to 49-year-olds, on average, paying the least. Premiums begin inching up again at around age 50.
  • Sex: In terms of national averages, the cost to insure male drivers younger than 25 is significantly more. However, female drivers above 25 often pay a higher price. A few states don’t allow insurers to consider sex when underwriting policies.
  • Marital status: Typically, the difference is small. However, a married applicant will pay a lower premium than one who is single.
  • Driving record: Every insurance provider has a battalion of underwriters crunching numbers to establish the amount of risk policy applicants present. Every moving traffic violation (ticket) you receive, every reported accident, and every insurance claim you file affects your profile. The more negative factors on your driving record, the greater risk you pose and the higher the premium you will pay.
  • Driving habits: All other things being equal, the fewer miles you drive, the less likely you are to be in a crash. Fewer is better when assessing the risk of a crash. Long work commutes or actually driving for your job may trigger a higher premium. Read about the average annual miles people drive.
  • Address: Some areas are more prone to accidents and vehicle crimes than others. Consequently, the state, city, or even the ZIP code where you live and drive can make a difference in your risk level. California and Florida have significantly higher car insurance costs than Oklahoma or Indiana. Parking in a garage at night rather than on a busy street can also make a difference.
  • Credit score: Although a few states don’t allow insurers to consider an applicant’s credit score or history when calculating a premium, most do. The groupthink is that an individual struggling to pay current bills will be more likely to file insurance claims. The better your credit score and cleaner your credit history, the less chance it will negatively impact your premium.

Can I Get an Insurance Quote Before Buying a Car?

Yes, it’s wise to obtain an insurance quote prior to a car purchase. However, unlike getting prequalified by a lender to know how much you can borrow before shopping for a house, you need some particulars. You need things like the vehicle identification number or the year, make, and model of the car before an insurer will provide an estimated premium. You don’t need to have possession of the car, but you must have some details.

At the minimum, here’s what you’ll need to supply for a realistic quote.

  • The driver’s license numbers of everyone on the policy
  • Year, make, and model of your vehicle
  • Vehicle identification number (VIN) of the car you like (or a similar vehicle)
  • Number of miles you expect to drive each year

How to Use Online Insurance Calculators

Although they aren’t a substitute for obtaining a more accurate quote directly from a car insurance provider, online calculators offer a sense of what the premium might look like on a particular car as you narrow your choices during the shopping process. Sites like NerdWallet offer calculators, as do some traditional insurers like Progressive.  

4 Steps to Take Before Seeking a Car Insurance Quote

To secure the best lowest cost estimates of insurance before buying a new vehicle, you should:

1. Narrow Your Vehicle Selection

For many, car shopping is a battle between the right and left sides of the brain—emotion versus common sense. We urge you to concentrate on the commonsense side. We can help keep you on course with our 10 Steps for Buying a New Car or, if you are shopping used, 10 Steps to Buying a Used Car. In any case, narrow your focus to one or two models that you are reasonably sure satisfy your needs and will fit into your budget.

2. Determine the Coverage You’ll Need

You need to buy enough coverage to meet your state’s minimum insurance requirements. However, that’s rarely enough to protect you from a financial loss if you’re in a severe accident. Instead of just sticking with the minimum limits your state requires, consider purchasing coverage that’s at least equal to your assets. It will help protect you if someone sues you after an accident.

Remember, some coverages that can help protect you, such as collision and comprehensive, aren’t required in any state. However, they may be worth considering, especially if you have a newer vehicle. If you have an auto loan or lease, your lender or leasing company will likely require you to maintain these coverages.

3. Pick a Sensible Deductible

The deductible is the amount you must pay before the insurance company pays for a covered loss. Not all types of auto insurance coverage have a deductible attached to them. But if you purchase coverage with a deductible, the size of that deductible can affect your premium. Typically, policies with higher deductibles cost less than policies with lower deductibles because the higher the deductible, the less likely you will be to file smaller claims. When establishing your deductible, pick an amount you can afford to pay out of pocket if you need to file a claim.

RELATED: How to Choose Your Car Insurance Deductible in 2025

4. Obtain Several Quotes  

Insurance companies use proprietary formulas to calculate rates, so pricing can vary significantly from insurer to insurer. That’s why it’s essential to shop around before purchasing coverage. Getting quotes from at least three insurers is wise. It’s a simple and straightforward process.

How to Obtain Car Insurance Estimated Premium Quotes?

We recommend you begin your search for estimated premium quotes with your current insurance agent or company because you have an established relationship, and they already have much of your current information. This way, often in a matter of minutes, you will have a reliable ballpark number from which to conduct the rest of your insurance search. If the agent is independent and represents several companies, it’s possible you could get several quotes with one request.

To round out your quote quota, you can call, email, or visit the offices of some reputable insurers. But remember, some of the more highly rated companies are regional. For example, Root Insurance is available in about 35 states. Among some of Bankrate’s top-ranked car insurance companies:

Several online insurance finders, like Root, Bankrate, LendingTree, and Insurify, allow you to contact several insurers at one time and then compare rates.

How to Compare Insurance Rates and Coverage

Rule No.1 for comparing car insurance (or anything else, for that matter) is to ensure you are comparing apples to apples. When that comparison is insurance coverage and rates, the apples-to-apples requires that the quotes involved are for exactly the same vehicle with exactly the same coverage. This requires some extra effort from you because it entails a serious analysis of every element of each quote.

PRO TIP: The amount of the deductible, the limits of the liability coverage, and discounts are three areas where coverage can vary wildly, affecting the quote. Always ensure they match when comparing quotes.

How to Save Money on Car Insurance

The best way to find the most affordable policy is to shop around and compare quotes between insurers. However, it’s important to stick with reputable companies with strong financial ratings and good customer reviews.

How to Find Car Insurance Discounts

Taking advantage of car insurance discounts can help you save. Discounts may vary between insurers, so it’s essential to ask about them when applying for coverage. Here are four of the most common discounts available today.

  • Good student: Studying hard won’t just earn an “A” on your next exam. It can also help you get a lower rate on your auto insurance. Many companies offer discounts to students who maintain minimum grade point averages.
  • Multi-policy: If auto isn’t the only type of insurance you need, you may be able to save with a multi-policy discount by purchasing more than one kind of coverage from the same insurer.
  • Multi-car: Insuring all your vehicles with one company may help lower your premium.
  • Safe driver: Safe drivers save insurance companies money. Avoiding accidents, tickets, and other moving violations will usually earn you a lower premium.
  • Defensive driver: Some insurers offer discounts to policyholders who have completed a defensive driving course.
  • Pay annually: You will almost always pay more if you pay your premiums quarterly, semiannually, or monthly. The differences aren’t huge, but paying the premiums in annual increments will save a few bucks.