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UPDATED: Mar 13, 2020
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Determining the cost of an insurance policy in advance is surprisingly difficult. Auto insurance premiums are based on a wide variety of variables, and no two people will pay exactly the same amount for car insurance. This is because insurance companies determine the cost of a policy by assessing an individual driver’s likelihood of being involved in a collision, and different drivers will have different risk factors.
What Factors Influence Auto Insurance?
Auto insurance companies rely on a combination of statistical data and personal driving history to determine the cost of a policy. People with a history of traffic violations, car accidents and DUI convictions will be considered higher-risk drivers than individuals with clean driving records.
Similarly, people who belong to high-risk driver categories will have higher insurance rates regardless of their driving habits. For example, teenagers pay more for car insurance than other people because teens as a group have more accidents than other drivers. Other high-risk categories include single young men and people with bad credit.
The type of car you drive and where you live also play a role in the cost of your coverage. Vehicles that are expensive to maintain or replace will usually cost more to insure than affordable autos, and flashy sports cars are often deemed a higher risk than family sedans or minivans. Areas with high crime rates or a large population of uninsured drivers will cost more for insurance than other areas.
Despite all of these factors, the general cost of insurance is usually fairly similar from person to person. Insurance companies must report their rates, and the cost of insurance is regulated. This means that an insurance company must justify any rate increases and keep them in line so that all drivers with similar risk factors will pay the same amount for insurance.
What is Full Coverage Auto Insurance?
When asking how much full coverage auto insurance costs, it’s important to understand what “full coverage” actually means, especially because the definition may vary from one company to the next. As a general rule, full coverage auto insurance is a policy that includes both first-party and liability coverage.
A liability-only policy only covers damages that you cause. In order to have your own damages repaired, you will need to carry the first-party coverages of collision and comprehensive. These are purchased separately, and in some cases “full coverage” auto insurance refers simply to liability and collision, whereas other definitions include comprehensive coverage as well.
All other coverages are considered additional to basic full coverage insurance. That means that rental coverage, personal injury protection, roadside assistance and all other coverages must be purchased in addition to basic full coverage insurance, and the price may be higher than a quote you receive for full coverage auto insurance.
The Role of Coverage in Determining Insurance Costs
Aside from a driver’s risk factors, the policy itself plays a role in the cost of insurance. The more an insurance company may be expected to pay during a claim or throughout the lifetime of a policy, the more they will charge for that policy. For example, it’s more expensive to carry full coverage than liability-only policies because the insurance company would need to pay for the repair of two vehicles rather than one following an at-fault accident.
Similarly, policies with high limits and low deductibles will cost more because insurance companies will need to pay more for each claim. If the driver agrees to pay $1,000 in a deductible for every accident, the insurance company must pay less than if the driver has a $250 deductible. This is why increasing the amount of your deductible or lowering your liability limits will often cause a dramatic decrease in insurance premiums.
The Cost of Full Coverage Insurance
An average auto insurance policy generally costs between $900 and $2,000 per year, with most costing around $1,500 per year. Of course, there is a lot of variation within these figures. Low-risk drivers with excellent driving records may pay as little as $80 per month while people with a history of DUIs or accidents could easily pay triple that amount.
The best way to determine the cost of auto insurance is to get a quote from multiple insurance companies. This will ensure that your policy’s price will be personalized for your specific needs and take into account individual factors like driving history or type of vehicle.
Be sure that you obtain quotes from a wide variety of insurance companies. Different companies will rate various factors differently, so your premiums may be more or less expensive from one insurer to the next. You will also want to discuss your policy needs with the insurance company to ensure that “full coverage” auto insurance means what you think it will and that you will get all of the coverages that you need.
By comparison shopping, you can get the best possible deal on auto insurance. Once you’ve selected a company, see if there are any discounts you may qualify for that will reduce the cost of insurance even further.