For most drivers, insurance is only an afterthought, something not worth considering until there’s no other way around it. But the better informed you are when opting for a product like auto insurance, the better your chances of snatching a great rate.

We’ve done more than 2,000 hours of research in car insurance (and counting), so hopefully, we can make this a little easier for you.

In this article:

How to Calculate Your Car Insurance

Auto insurers have many statistics and risk studies that influence their quoted premiums. To get a reliable quote, you need to supply the necessary information when using a car insurance calculator.

If you compile a list of all the needed information beforehand, it makes the quote gathering process much more manageable.

Here is a quick rundown of the most requested items.

  • Vehicle Information: Including VIN (Vehicle Identification Number), make, model, trim style, and year
  • Safety Equipment: Use your manual or the manufacturer’s website to create a list of the features on your vehicle
  • Personal Information: This encompasses your age, gender, driving history, and approximate annual miles
  • Location: This includes where you drive and park your vehicle

How Do Insurers Determine Car Insurance Premiums?

car insurance calculator

When you buy insurance, you’re looking to mitigate the risk of major losses associated with car accidents, so you purchase a policy that essentially lets you share that risk with a pool of other policyholders.

This is called risk pooling, and it’s one of the most popular risk management approaches in the insurance industry.

Under this model, insurance companies classify you into one of several different risk groups. If you’re placed in a lower risk group—meaning you’re less likely to file claims—you are charged a lower premium.

Providers have to be very selective about who they insure and charge premium amounts that are proportionate to the risk they’re incurring.

Usage-Based Car Insurance

In the past, insurance companies relied solely on car accident statistics and claims filed, which they then categorized by age group, gender, area, vehicle type, etc.

Nowadays, technological advances in the field of data science have made it possible to carry out a more sophisticated assessment of an individual’s driving history based on their actual driving habits as recorded by apps.

The data gathered is then sent to the insurance company through telematics and used to determine the drivers premium rates. This is called usage-based insurance (UBI).

Regardless of how your insurance company assesses risks, you’re likely to be charged more or less depending on the risk you pose to your insurer.

What Demographic Gets the Cheapest Rates?

In general, insurance companies offer lower premium amounts to creditworthy female drivers over the age of 25 who are:

  • married
  • drive older, less expensive or safer cars
  • live in rural areas
  • have had no accidents or driving violations
  • have low mileage according to state standards

These drivers pose less of a risk for insurance companies because, according to statistics, they cause fewer accidents and report fewer claims.

State Car Insurance Requirements

Each state sets different minimum car insurance coverage requirements you must comply with if you’re financing your vehicle through a bank or lender.

Most states require you to have a minimum of liability coverage. Liability coverage provides a benefit in the event you are responsible for an accident and have to cover medical expenses related to another person’s injuries or damage to their property.

The following table illustrates the minimum auto insurance requirements by state, in ascending order (by coverage amounts):

StatesCoverage Requirements
Florida$10k property damage liability per accident
$10k personal injury protection
California$15k bodily injury liability per person
$30k bodily injury liability per accident
$5k property damage liability per accident
Delaware$15k bodily injury liability per person
$30k bodily injury liability per accident
$10k property damage liability per accident
Pennsylvania$15k bodily injury liability per person
$30k bodily injury liability per accident
$5k property damage liability per accident
$5k medical benefits
Arkansas, Delaware, Nevada$15k bodily injury liability per person
$30k bodily injury liability per accident
$10k property damage liability per accident
New Jersey$15k bodily injury liability per person
$30k bodily injury liability per accident
$5k property damage liability per accident
$15k personal injury protection
Louisiana$15k bodily injury liability per person
$30k bodily injury liability per accident
$25k property damage liability per accident
Michigan$20k bodily injury liability per person
$40k bodily injury liability per accident
$10k property damage liability per accident
Iowa$20k bodily injury liability per person
$40k bodily injury liability per accident
$15k property damage liability per accident
Hawaii$20k bodily injury liability per person
$40k bodily injury liability per accident
$10k property damage liability per accident
$10k personal injury protection
Indiana, Montana, New Mexico, Washington$25k bodily injury liability per person
$50k bodily injury liability per person
$10k property damage liability per accident
Colorado, Idaho, Tennessee$25k bodily injury liability per person
$50k bodily injury liability per accident
$15k property damage liability per accident
Kentucky$25k bodily injury liability per person
$50k bodily injury liability per accident
$10k property damage liability per accident
$10k personal injury protection
Wyoming$25k bodily injury liability per person
$50k bodily injury liability per accident
$20k property damage liability per accident
Alabama, Arizona, Georgia, Mississippi, Ohio, Oklahoma, Rhode Island$25k bodily injury liability per person
$50k bodily injury liability per accident
$25k property damage liability per accident
Maryland$30k bodily injury liability per person
$60k bodily injury liability per accident
$15k property damage liability per accident
Utah$25k bodily injury liability per person
$65k bodily injury liability per accident
$15k property damage liability per accident
$3k personal injury protection
Texas, North Carolina$30k bodily injury liability per person
$60k bodily injury liability per accident
$25k property damage liability per accident
Connecticut$20k bodily injury liability per person
$40k bodily injury liability per accident
$10k property damage liability per accident
$20k uninsured/underinsured motorist coverage per person
$40k uninsured/underinsured motorist coverage per accident
Kansas, Wisconsin$25k bodily injury liability per person
$50k bodily injury liability per accident
$10k property damage liability per accident
$25k uninsured/underinsured motorist coverage per person
$50k uninsured/underinsured motorist coverage per accident
WA, District of Columbia$25k bodily injury liability per person
$50k bodily injury liability per accident
$10k property damage liability per accident
$25k uninsured/underinsured motorist coverage per person
$50k uninsured/underinsured motorist coverage per accident
$5k uninsured/underinsured
Illinois$25k bodily injury liability per person
$50k bodily injury liability per accident
$20k property damage liability per accident
$25k uninsured motorist coverage per person
$50k uninsured motorist coverage per accident
Massachusetts$30k bodily injury liability per person
$60k bodily injury liability per accident
$15k property damage liability per accident
$20k uninsured motorist coverage per person
$40k uninsured motorist coverage per accident
$8k personal injury protection
Missouri$30k bodily injury liability per person
$60k bodily injury liability per accident
$10k property damage liability per accident
$25k uninsured motorist coverage per person
$50k uninsured motorist coverage per accident
Nebraska, South Dakota$25k bodily injury liability per person
$50k bodily injury liability per accident
$25k property damage liability per accident
$25k uninsured motorist coverage per person
$50k uninsured motorist coverage per accident
Alaska$50k bodily injury liability per person
$100k bodily injury liability per accident
$25k property damage liability per accident
Oregon$25k bodily injury liability per person
$50k bodily injury liability per accident
$20k property damage liability per accident
$25k uninsured motorist coverage per person
$50k uninsured motorist coverage per accident
$15k personal injury protection
Minnesota$25k bodily injury liability per person
$50k bodily injury liability per accident
$10k property damage liability per accident
$25k uninsured motorist coverage per person
$50k uninsured motorist coverage per accident
$40k personal injury protection
South Carolina, West Virginia$25k bodily injury liability per person
$50k bodily injury liability per accident
$25k property damage liability per accident
$25k uninsured motorist coverage per person
$50k uninsured motorist coverage per accident
$25k uninsured motorist property damage coverage
North Dakota$25k bodily injury liability per person
$50k bodily injury liability per accident
$25k property damage liability per accident
$25k uninsured/underinsured motorist coverage per person
$50k uninsured/underinsured motorist coverage per accident
$30k personal injury protection
Vermont$25k bodily injury liability per person
$50k bodily injury liability per accident
$10k property damage liability per accident
$50k uninsured motorist coverage per person
$100k uninsured motorist coverage per accident
$10k uninsured motorist property damage coverage per accident
Maine$50k bodily injury liability per person
$100k bodily injury liability per accident
$25k property damage liability per accident
$50k uninsured motorist coverage per person
$100k uninsured motorist coverage per accident
$2k medical payments coverage
New York$25k bodily injury liability per person
$50k bodily injury liability per accident
$50k liability for death per person
$100k liability for death per accident
$10k property damage liability per accident
$50k personal injury protection
$25k uninsured motorist coverage per person
$50k underinsured motorist coverage per accident
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Does Every State Require Car Insurance?

You’ll notice New Hampshire and Virginia aren’t included in this table. That’s because in these two states auto insurance is not a legal requirement.

In both of these states, minimum liability coverage is optional, yet drivers are held responsible for damages and injuries they may cause to themselves or others while on the road.

Several other states offer similar options, where drivers are not obliged to purchase insurance and are instead responsible for showing proof of financial responsibility.

Such is the case of Arizona and Mississippi, where uninsured drivers must post a bond or make a cash or security deposit as proof of their ability to cover damages from a car accident.

It’s important to know your state’s car insurance requirements before you opt for an insurance policy or coverage amount so that you’re well protected and don’t end up overspending on coverages you may not need.

What You Need to Calculate Your Car Insurance

We’ve already touched on some of the factors that affect your auto insurance premiums. Just one can either save you money on auto insurance or end up costing you a pretty penny.

Here’s some detail on how each factor can affect your premium.

Location

Your location is among the most important factors to consider when you purchase auto insurance.

Why? Because, as we discussed above, minimum auto insurance requirements are set at the state level, which means the amount of coverage you’re required to purchase will depend on your state of residence.

In turn, the coverage level you opt for will affect your monthly insurance costs. The more comprehensive the coverage, the higher the premiums.

Age

Your age is another relevant factor affecting your auto insurance premiums. Drivers under the age of 25 tend to pay more in premiums than those above that age (if they’re covered under their own policy).

The reason for it is that the younger the driver, the more limited their driving experience and the higher their chances of being involved in an accident.

Let’s not forget that insurance companies base premium amounts on perceived risks, and younger drivers without families of their own can seem less responsible than older, more experienced drivers with families they’re accountable for.

Gender

Your gender will also influence your insurance premiums. Although it may sound biased, that determination is based on driving records and historical data that suggest female drivers cause fewer accidents than male drivers.

That may be due to the fact that women tend to drive shorter distances or fewer miles in comparison to male drivers and are less likely to be involved in traffic violations like speeding and DUIs.

Additionally, men tend to purchase cars that cost more to insure. Again, all this is based on statistical information.

Marital Status

Similar to the gender factor, marital status also tells insurance companies a good deal about their policyholders’ likelihood of filing auto insurance claims.

That’s because statistics on car insurance reveal that singles are more likely to be involved in car accidents than married individuals.

In addition, there are car insurance discounts for those who bundle policies. However, combining policies don’t always guarantee savings opportunities, as rates also depend on other factors such as each person’s driving and claims history.

Type of Vehicle

Several elements go into defining this particular factor.

Insurance companies look not only at the price of the vehicle (expensive cars are harder to repair or replace in the event of a total loss) but also at its make and model.

Some makes and models are safer than others, decreasing the chances of major losses due to claims payments for medical expenses. Similarly, some cars cause less damage than others when involved in collisions.

Mileage

In reality, this factor isn’t exactly about how many miles you drive, although that will certainly be taken into account, especially when the time comes to apply for discounts.

What insurance companies really want to know is how you use your vehicle. Meaning if you drive for work or pleasure, as that gives them a better idea of your likelihood of filing a claim for an accident such a collision.

The more you drive, the higher your chances of having an accident, regardless of whether or not you’re at fault.

Accident and Driving History

Your accident and driving history play a central role in your monthly premium.

If you’ve been involved in an accident or collision in the past or have had multiple driving infractions, know your insurance premium will be higher.

Again, the greater the perceived risk, the higher the costs of car insurance for the person who poses that risk.

Credit score

Many insurance companies also base their rates on credit scores. Research and statistical data reveal that credit scores are good indicators of people’s propensity for accidents.

One study conducted by the University of Texas concluded that “lower than average credit scores indicate higher than average loss ratios.”

Simply put, lower credit scores seem to correlate to a greater propensity for accidents.

As we’ve already mentioned, these elements are important because they are factored in the calculation that determines your auto insurance rate.

If you know the above details as well as your state’s minimum car insurance requirements you may have a better idea of the kinds of rates you might be offered.

Free Online Car Insurance Calculators

If you’re conducting your search online, you must already know there are countless websites offering car insurance estimates.

If you want a very general number that gives you a better sense of what you can expect to pay for auto coverages on a monthly basis, a calculator is a great tool to play with.

However, calculators can only provide you with a very basic, general idea of those monthly costs.

Those looking to switch to a different insurance provider or wanting to save on monthly premiums might benefit from using a service like gabi.com’s Quote Comparison tool, which helps users review their current policies and compare premiums from different leading carriers.

Gabi is an excellent alternative for those who still haven’t chosen an insurance carrier, as they allow customers to compare quotes from several different companies, even those outside their network of partners.

LendingTree, one of the most trusted and experienced online insurance marketplaces out there, also offers an insurance comparison tool with valuable information regarding rates and state minimum coverage requirements.

Compare Quotes from Top Insurance Companies

A foolproof way of getting the best possible rate on your auto insurance is to comparison shop.

Regardless of whether you begin the process through an agent or an online tool, you’re going to need to weigh the different factors and choose the best car insurance company for your needs.

The following are a few to pay close attention to:

  1. Customer surveys and satisfaction studies: J.D. Power publishes annual studies that rate top providers concerning overall customer satisfaction, claims processing, and customer service.
  2. Complaint Studies: The National Association of Insurance Commissioners posts yearly complaint ratios based upon complaints received vs. premium dollars. Also, the California Complaint Study creates ratios from complaints received vs. actual written policies.
  3. Financial Strength: Independent rating agencies such as A.M. Best, Fitch Ratings, Moody’s Investors, and Standard and Poor’s provide free credit reports on insurance providers. This way you can make sure your potential insurance provider can survive a large-scale disaster that could result in burdensome claim filings.

For a more in-depth look at these factors, check out our post on The Best Car Insurance Ratings and Reviews.

Remember to request estimates for the same level of coverage so you can have an accurate idea of insurance costs through each carrier.

Compare prices and look for discounts and savings opportunities you may qualify for, such as discounts for taking defensive driving courses or installing safety devices in your vehicle.

Steps to Purchasing Car Insurance

  • Know your state’s minimum car insurance requirements
  • Know the current value of your automobile
  • Determine your needs based on your situation and the state’s legal requirements
  • Apply for insurance quotes and compare coverages
  • Look for discounts and savings opportunities
  • Consider the insurer’s reputation for customer service and claims processing
  • Pick a company that offers sufficient coverage, reasonable prices, and has excellent service ratings