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Average Car Insurance Rates Revealed

Written by Todd Clay. Posted in Research Last Updated: 08/21/2012

Paying too much for auto insurance? Find out the average car insurance rates by state, so you can shop smarter in your zip code and city.

average car insurance Rates Vary By State And Other Factors

Average Car Insurance Rates Vary

Is there such a thing as average car insurance rates? According to NAIC in 2009, the average car insurance premium in the state of New Jersey was $1101 while the average cost in North Dakota was $510. That’s an 53.7% difference – big money when you’re buying a policy every year. According to that same study, average car insurance premiums across the nation were $789, which still makes New Jersey’s average car insurance rates ridiculously high.

Updated Insurance Rates by State

We also compiled some average car insurance rates below. For now, the better answer to the question about average car insurance rates is that it all depends.

Auto Insurance Rates Depend On Your Location

As you may have guessed, auto insurance rates depend on your state of residence. As we have already talked about the average car insurance premium in New Jersey is notoriously high. Historically, insurance regulations in New Jersey are strict. In some cases, regulators have encouraged some companies to leave, decreasing competition, and thereby driving premiums even higher. Still, as high as New Jersey rates are, they’re usually more in Washington, D.C.

In addition, the average car insurance rates in a city, will be more than the average car insurance rates on a farm. Because, insurance companies base their prices on risk, city-dwellers pay more. It’s more likely for bad things to happen to your car in a city than driving to and from the convenient store in Podunk, USA.

Average Car Insurance Rates Depend On Your Driving History

For those that have a not-so-stellar driving history, insurance companies will reward them with not-so-stellar average car insurance rates. Drivers with clean/clean records earn cheaper premiums. Clean/clean is insurance-speak for no accidents and no tickets. If you drive without accidents or tickets for three years, in most cases insurers won’t count your old record against you. There are definite exceptions to the rule like DUIs.

 Average Car InsuranceRates Depend On Your Age and Sex

Like it or not, younger drivers carry more risk than older, more experienced drivers. As such, drivers under 25 usually pay more for their car insurance policy than drivers over 25. If you’re under 25 right now, don’t worry, it’ll be here before you know it.

In addition, the average car insurance rates for younger female drivers are often less than their male counterparts. Research shows younger males are more aggressive drivers, often having more accidents than females in the same age bracket. That’s why insurance companies charge higher premiums for young male drivers.

Average Car Insurance Rates Revealed

As for average car insurance rates, we compiled a list of rates from several states. Although they’re not definitive lists, it’s a helpful tool for comparing rates at different companies in a few different states.

It’s better to compare your current premium to a few other companies directly. Make sure you get several quotes before you settle on a policy. You may not know the exact average car insurance rates, but you’ll find out if you’re getting ripped off by your current insurer.

Was this article on average car insurance helpful? Let me know what I missed!

Cancel Your Car Insurance and Get a Refund

Written by Todd Clay. Posted in Research Last Updated: 08/17/2012

When switching policies, why you should cancel your auto insurance and what happens if you don’t.

Cancelling your car insurance the right way.

Cancelling your car insurance the right way.

If you’ve switched auto insurance policies, it’s time to cancel your old car insurance policy. After all the hard work of shopping, quoting, and buying a new policy, you’re not finished with the process until you’ve cancelled your old policy. But why is it a big deal? More on that below.

Switching Auto Insurance Policies

You finally have that new policy where you’re saving hundreds of bucks on your car insurance. You might think that’s all there is. After all, don’t all these insurance companies talk to each other? Once you buy a policy from Company B, doesn’t Company B’s agent give Company A’s agent a call and tell them you switched your policy. If only things were that easy. Insurance companies are not responsible for that part – you are.

Fact is, once you switch policies, the old company doesn’t know anything about it. That means you’ll be double-covered, paying double premiums if you don’t cancel your old policy. One problem with this situation relates to the insurance companies. They don’t like it when there’s double coverage. If there’s an accident, there could be an issue about who will pay for the accident.

Worse yet, if you don’t pay the other premium, then the old company will cancel you for non-payment. That event goes on your credit report. Essentially, if you don’t cancel your old policy, it could affect your credit, your ability to get a MasterCard, finance a car, or even buy a new home. It’s that important. Bottom line – don’t let the policy cancel itself.

How To Cancel Your Old Auto Insurance Policy

It’s easy to cancel your auto insurance policy. Simply call your old insurance company and request to cancel your auto policy. Give a specific date for the end of your coverage. There’s no need to overlap coverage from the old policy to the new policy. For instance, if you have a new policy starting on February 25, then cancel your old policy effective February 25.

Each company operates differently. They may require you to sign a cancellation request, or they may allow you to just cancel it over the phone. It sometimes depends on your relationship with the company or agency. Check over the paperwork, sign whatever they want you to sign, then you’re done with the insurance company. If you’ve financed the car, make sure you update the bank with your new insurance company information.

By the way, insurance companies handle these things every day. Don’t feel bad about switching companies. After all, if they would have given you a better price or provided better service, then you wouldn’t be cancelling.

Get A Refund on Your Car Insurance Premium

Since auto insurance policies are six or twelve month contracts, you might be switching policies in the middle of the policy period. If you’ve prepaid for the policy either on a monthly, semi-annual, or annual basis, then they owe you some cash. When you’re on the phone with the old company, ask them about a “return on unearned premium”. That’s the money you’re owed for not finishing the contract. The good news is that most consumers have that money coming to them.

Don’t Drive Uninsured

Whatever you do, don’t drive uninsured. Make sure your new policy is in force before cancelling your old policy. It would be a shame to have an accident between policies. Don’t be a statistic – make sure you always have coverage if you’re driving a vehicle.

Was this article helpful? If so, leave a comment. If not, tell me what other consumers should know about cancelling their auto insurance.

Car Insurance Junk Mail

Written by Todd Clay. Posted in Research Last Updated: 01/18/2011

How auto insurance companies market through the mail –

Junk Mail Card from Allstate

This one came in my junk mail pile courtesy of Allstate.

Ever since I started writing for businesses, I’ve been intrigued by “junk mail”. The industry calls it direct mail, but consumers don’t seem to care.

Much of it ends up in the trash before any envelopes are opened. One industry-famous direct mail writer, Gary Halbert once said, “I am incessantly preaching the people of America sort through their mail while standing over a wastebasket?” Just think about how that makes the writer feel about their work.

Lots of Insurance Junk Mail

In 2007, according to the Direct Marketing Association (DMA), insurance companies spent $6.81 billion in insurance advertising through the mail. Not only that, but expenditures were expected to grow in the 7.6% per year through 2012. The few letters you saw was just a sample of the literal tons of paper, ink, and trinkets sent by insurance companies every year in an effort to gain your business.

So why do they do it? The DMA reported that insurance companies get back $8.15 for every dollar they spend through their junk mail campaigns. That means if Allstate sends out $1 million in direct mail, they expect to get back $8,150,000 in revenues from their efforts. That’s not a bad return on investment.

The Culprits, er, Insurance Direct Marketers

Most insurance direct mail comes from auto insurance companies. Think about it. For those of us who check our mailboxes, how many packages did you see from XYZ Life Insurance Company versus GEICO? If you think about it, auto insurance companies sent many more packages compared to any other type of insurance.

I’ve saved most of my insurance junk mail since starting this website (I know I’m a nerd). Granted, I’m only providing my anecdotal experience. However, from what I’ve seen, GEICO is the biggest direct mailer of the industry. I probably receive two pieces of GEICO mail for every one piece of mail from other insurance companies. I’m even getting stuff from GEICO after switching to their policy. (Someone needs to update their database.) Other companies I’ve seen in the mail were Progressive, Allstate, AAA, AIG, Farmers, and Countrywide.

What’s the Pitch?

There are several pitches insurance companies use in their direct mail campaigns. Typically, the value centers around price. After presenting the lizard or the cavemen, GEICO pushes savings more than anything else. The standby “15 Minutes Can Save You 15% on your Car Insurance” is always popular. Or the latest I saw from them “Millions of consumers will lose hundreds of dollars this year by failing to shop around for a better value on auto insurance.” also pushes their price over any other benefit.

Allstate recently sent this piece to me. “Your Enclosed Instant Access Savings Card Can Be Worth Hundreds of Dollars To You” was the teaser text on the front of the envelope. When I opened the letter, they enclosed a mock-credit card with a 1-800 number embossed on the front. Next to the attached card, a big font read “Average Annual Savings $353.00.” Again, price was the big draw.

Farmers tried a slightly different approach. Just under return address read the words “Do you love your agent?” But the primary teaser text was “The ‘Middleman’ could save you hundreds of dollars a year on your auto insurance.” Again, Farmers says I can save a few hundred bucks by going with them, but they pushed the agent relationship as well. They could be right. I haven’t received a Farmers quote for a few years.

Despite the success of the internet, direct mail is still alive and well. As long as insurance companies get an 8-1 return from their junk mail advertising, expect to see more lizards and good hands in your mailbox. As you recycle or chuck those annoying letters, keep this in mind. Those bold-lettered packages are subsidizing the relatively cheap letters you send via snail mail. See, junk mail is useful after all. Thanks, GEICO.

Do you have any thoughts about insurance junk mail? If so, leave a comment.

Gap Insurance

Written by Todd Clay. Posted in Definitions, Research Last Updated: 03/23/2011

What is Gap Insurance, how much does it cost, and do you really need it?

Bridging the Gap of Depreciation with Gap Insurance - The 360 Bridge - Austin, Texas

Bridging the Gap of Depreciation with Gap Insurance The 360 Bridge - Austin, Texas

Gap Insurance is unlike any other consumer insurance policy. Why? Because it covers the part of your car that only banks would think about: depreciation. That’s the part that goes down every month you own your vehicle. Still confused? Let me explain.

What is Gap Insurance?

You’ve probably heard it said, “once you drive a new car off the lot, it’s worth thousands of dollars less.” It’s true. Say you visit your local Nissan dealership. That new Altima is screaming your name, so you buy it. After handing over your down payment, the salesguy hands you the keys to your new ride. You just bought a $22K vehicle, but once you’re home, you could only sell it for $18,000. That missing $4,000 ($22,000 – $18,000) is the depreciation you incur by merely relocating the vehicle.

Unfortunately, a regular auto insurance policy does not cover a car’s depreciation. If, on the second day of owning your Altima you total your car, the insurance company would only pay you the actual cash value (ACV) for the car, or $18,000. But the bank still wants all the money you borrowed. Where are you going to come up the extra $4K? That’s why you need gap insurance, also called loan/lease gap coverage. If you want to cover the depreciation of your vehicle for the life of the vehicle, then get gap insurance. It sometimes even pays for your deductible.

How Much Does It Cost?

Since you’re not paying to insure your entire vehicle, a gap insurance policy is not as expensive as regular car insurance. However, since the policy is basically all-risk coverage, it’s not exactly cheap either. If you shop around, you can pay a one-time premium of $300 to $700. The price depends on the amount financed and sometimes the terms of the loan or lease. There are caps involved, but most new vehicles are eligible for gap insurance. Check with your finance company for an easy quote.

Do You Really Need Gap Insurance?

There are a couple of reasons why you might want gap insurance. For one, if you owe a significant amount on the car you should consider it. How much money? Dave Hurt, who sells gap insurance with Car Select, says, “Anyone who buys a car and finances 80% of the purchase price should buy Gap Insurance.” That’s probably a good guideline.

Second, you should consider gap insurance if it’s early in the life of your loan or lease. If you owe more money than your car is worth, you’re considered ‘upside down’. Gap insurance could ease you out of an ‘upside down’ situation if you total your car. It may not be required by your finance company, but it’s not a bad decision in certain circumstances.

It’s worth mentioning that gap insurance is not for every car. If you have an older vehicle, gap insurance may not be available for it. Check with the company who writes the gap insurance policy if you’re curious about your particular vehicle.

Finally, check to see if your finance company already includes gap insurance with the auto loan. When I worked with State Farm, their bank automatically included a gap insurance policy for new car purchases. True, their auto loan rates could be higher than dealer financing, but it was an added benefit of their auto loans.

If you have an experience with gap insurance, feel free to leave a comment.

How to Shop for Car Insurance

Written by Todd Clay. Posted in Research Last Updated: 04/10/2012

4 Easy Steps to Getting the Best Rate With The Best Company Every Time

How to Save Hundreds When Shopping for Auto Insurance.

How to Save Hundreds When Buying Auto Insurance.

Finding out how to shop for car insurance isn’t hard. But if you do it wrong, you could waste time, get frustrated, or worse, lose money. When I say a lose money, I’m talking thousands of dollars a year. It’s worth taking some time to learn the process. If you do, you’ll shop smarter, save some cash, and get peace of mind knowing you did it right.

Stop Wasting Good Money

In case you don’t think it’s worth your time, consider a normal driver in Texas. (Your state will be different, but the example still applies.) The Texas Department of Insurance publishes auto rates from all the insurers in the state. In 2008, a married 35-yr old driver in Dallas County with no accidents or tickets could pay anywhere between $243 and $1128 for a 6 month policy. The same driver with the same coverage could pay $1770 more per year because they didn’t shop their car insurance – almost two grand! Unfortunately, this is not uncommon.

That’s why it’s so important to make sure you’re getting a good deal. You may love your agent, but think about this: Your agent gets a commission from every extra dollar you waste with their company. If you don’t look out for yourself, your agent won’t do it for you. That money is yours – don’t just give it away. Here’s what you need to do.

Step 1: Pick Some Car Insurance Companies

Not every auto insurance company is worth your business. You need to find a few other companies to compare. How do you get a list of companies?

Ask around. Ask your friends who insures their cars. They’ll let you know if they’ve had a good or bad experience. Don’t want to ask around? Then check out some customer reviews. Collect a list of some auto insurance companies you want a quote from. I suggest you pick at least 3, but preferably 7 companies to compare. That way you get a healthy sample for the best possible savings.

Step 2: Narrow Your Choices

Once you have your list, check two other things. First off, financial strength. Various ratings agencies measure the financial stability of insurance companies. A.M. Best and Standard and Poor’s are the most prominent agencies. You can look up each company’s financial rating at your state’s department of insurance.

Second, ask the question: do those companies advertise? Companies that advertise are typically growth-oriented companies. This is a positive trait since you don’t want to send your premium dollars to a company that isn’t motivated to gain your business – how will they treat you when you have a claim. If you haven’t heard of one of the companies on your list, then it may not be a good fit.

Step 3: Getting Online Quotes

Go online for auto insurance quotes. Why? Because it takes too much time driving around, sitting in offices, or even jabbing on the phone with salespeople. The process takes long enough without any unnecessary steps.

The quickest way to get multiple quotes is to use a ‘quote aggregator’. It takes a few minutes to fill out a questionnaire. At the end, you can see quotes from several car insurance companies, and you’ve only filled out one form. I’ve included a link to make it easy for you: Online Quote Aggregator

After that, grab quotes from the remaining the companies on your list. Use a search engine to find the company websites. Auto insurance quote instructions should be very prominent at those sites.

Step 4: Confirm Online Quote Over the Phone

Now you have some quotes, it’s time to confirm the price. For your best auto insurance quotes, make a couple of phone calls to the general company number. Again, a search engine is helpful here. You can also call a local agency if that makes sense. Tell them about your online quote. If they can’t access it, answer the questions again.

There’s no reason to make 5 phone calls. You’ve already narrowed down the companies using the previous steps above. If you’re happy with the first quote on the phone, then buy the policy. Make sure it’s in effect before cancelling your current policy. Chances are you saved enough money to pay yourself a few hundred bucks for your time. After all, where else can you pick up an extra few hundred to a thousand bucks for a couple hours of work?

If these steps helped you shop for car insurance, leave a comment to help others in their search for a cheaper company.

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