Where you live, how much car insurance you need, your driving history, vehicle type and age are just some of the factors that influence the cost of car insurance. The good news is that, in many areas, the price of auto insurance has been dropping over the past few years. In 2009, the national average could be estimated at $144 a month , but, in 2011, it is $120.

That’s a saving of $294 over the whole year. However, car insurance premiums vary immensely, depending on the specific situation, so anyone thinking about buying car insurance needs to understand how auto insurance works.

Will I pay the average cost of car insurance?

A calculation of the average price of car insurance, across all age groups and scenarios, is not necessarily an accurate indicator of what a particular individual will be expected to pay. It is really only useful as a basis for comparison. For example, a twenty-one year old living in Greenwich Village, New York City will pay a vastly different premium in comparison to a forty-two year old living in a sleepy country town in Montana. Moreover, monthly premiums vary immensely from company and company.

It is better to choose a series of specified factors and use them to determine an average. For example, you could work out an average for a twenty-one year old, with a clean driving record, living in Greenwich Village and compare it with that of an individual in the same situation living in San Francisco. Of course, the price of car insurance is hardly going to be a reason for you to move to another state, but it will provide you with a general indication of how your situation compares with those of others.

How does geographical location affect the cost of car insurance?

The price of car insurance usually comes down to perceived risk of you filing a future claim. The general rule is, the greater the risk, the higher the premium. Risks, including geography, urban development, likelihood of theft and the workings of the legal system, vary from state to state.

For example, the 2009 rate of auto accident fatalities, as a median, was 18.23 per 100,000 people. However, in Alpine County, which has the highest fatality rate per capita in California, the median was 96 – more than five times the national rate. When it comes down to the bare figures, Los Angeles actually suffered the highest number of fatalities in California, at 588 but In 2011, the average cost of car insurance in California was $99.16 per month. This is about $20 cheaper than the national average. Geography alone does not dictate the cost of your insurance.

In contrast, drivers in Louisiana suffer the highest car insurance costs in the United States. The average there in 2010 was $209.24 per month, which is more than double what the average Californian pays.

Many people say that Louisiana’s exorbitant costs are due to their legal system. If any individual seeks a claim of more than $50,000, they can embark on a jury trial. This means that many insurance companies accept a settlement at a little under $50,000, increasing the potential financial risk of possessing an automobile and driving up premiums. Drivers in Michigan face similar legal difficulties and pay the second highest monthly car insurance premiums in America.

How does the level of coverage affect the cost of car insurance?

By law, all automobile owners in the United States must purchase a minimum of liability insurance in the form of bodily injury and/or property damage. The cost of this minimum varies from state to state. If you decide to buy only this minimum, then you pose little financial risk to your insurance company and thus can expect to pay the lowest possible premiums.

However, if you need or desire the peace of mind that comes with comprehensive and/or collision insurance, or any extras, then you can expect to see a significant increase in your monthly cost. You can adjust your deductible or excess to affect your premiums but generally speaking, the higher the deductible, the lower the premiums.

How does my driving record affect the cost of car insurance?

Again, this comes down to risk assessment. If you have a history of wild driving practices and the state has a record to prove it, then you’re going to be looking like a rather risky prospect in the eyes of car insurance companies. If you have been caught speeding or flagrantly disobeying the rules of the road or have been the cause of any accidents, then you can expect to pay more than someone who has been doing the right thing for the whole of their driving life.

How does my age affect the cost of car insurance?

Sadly, young people are a statistical nightmare on the roads. A sixteen-year-old driver has a three times higher chance of dying in a car crash than anyone else. This is largely due to inexperience and to the tendency to take risks, such as refusing to wear a seatbelt, speeding, or driving while intoxicated.

Thus, auto insurance companies charge high premiums for young drivers. As soon as a mature driver adds a teenager to their own policy, they can expect their monthly costs to skyrocket.

How does my vehicle type affect the cost of car insurance?

The higher the value of your car, the more expensive your premiums will be since an insurance company can expect to pay more should it be stolen, damaged or deemed no longer roadworthy following an accident.

How much will I pay for car insurance every month?

This will really depend on your unique profile so it’s important to shop around and compare car insurance quotes. All auto insurance companies use different risk formulas and while average premium rates can certainly be a good a ballpark guide the only way to find out for sure is to request quotes from multiple providers.