How do auto insurance rates affect annual income?
One of the biggest questions regarding auto insurance: How will auto insurance rates affect my income? Ultimately, consumers want to pursue cost-efficient methods as much as possible. Most of our guides give readers an outlook into how much they can save for auto insurance.
Therefore, we want to continue that with this article by showing everyone who visits this guide on how credit history affects annual income. We gathered some information from Zip Recruiter and summarized the average annual income by each state in the U.S.
In addition to annual salary, we included the average annual rate for auto insurance of each state.
|States||Average Annual Rates||Average Annual Income||Insurance as a Percentage of Income|
How do you find auto insurance as a percent of income? Simply divide the average annual rate of auto insurance into the annual income. It will look something like this:
- Average annual rate – $3,200
- Annual income – $38,000
Divide 3,200 / 38,000. The solution will be 0.0842
- Auto insurance as a percent of income – 8.42 percent
If your credit history is fair or good, you may be eligible for lower auto insurance rates in addition to other discounts. The lower rates will decrease auto insurance as a percent of income.
Try it with your annual income and your current rate for auto insurance.
Estimated Six-Month Car Insurance Policy Rates
What if auto insurance policies only go for six months? Good question! If you divide our average annual rate data by two, you will see the auto insurance rates for a six-month policy. Here is a summary of each state.
|States||Average Six-Month Rates|
|District of Columbia||$740|
Michigan is the most expensive state for auto insurance, even though the average annual rates decrease by half. If you extend your policy beyond six months, you may receive a loyalty discount, which will further decrease the auto insurance rate of your policy.
Estimated Monthly Car Insurance Policy Rates
You can take it a step further and estimate monthly rates by dividing the average annual rate for each state by 12. The monthly rate is the premium you’ll pay per month. Let’s review the summary of estimated monthly rates.
|State||Average Monthly Rates|
|District of Columbia||$370|
These monthly auto insurance rates are general rates that differ from auto insurance quotes from each company. Why? Auto insurance quotes generate rates based on personal information about potential customers. Anonymous quotes or general rates are just a road map to how much you can spend for auto insurance.
The average annual rates in the data are an insight into how much you’ll pay based on location. Enter your zip code into the FREE tool below to find the best car insurance rates for your budget today.
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Pay Your Auto Insurance Premiums
Having a good credit score is one of the ways that you can expect to pay less for your auto insurance premium because it shows that you are likely more responsible and a lower risk driver. If you receive judgments against you and are not able to take care of your financial responsibilities, your credit score will take a major hit.
The bigger impact on your credit score would be if you chose to not pay your auto insurance premiums and then were caught driving without insurance.
Could credit checks for auto insurance become illegal?
Advocates for consumers are seeking to outlaw auto insurance companies from using credit history to issue higher rates. Insurance Business Magazine reported U.S. Representative Rashida Tlaib (D-Michigan) introduced a bill that will prevent companies like insurance providers from charging higher rates for poor credit.
This video shows a news report on this bill and Tlaib’s view on credit history and auto insurance.
The bill was introduced in 2019 and has not made any significant strides just yet, but it could resurface in the years to come.
Not paying your car insurance can get you in big trouble with law enforcement and the DMV. Make sure you do your best to keep your coverage from lapsing.
If your policy has already lapsed, start shopping around for coverage right away.
Find a low-cost option by comparing online quotes instantly, and then apply for the best product so that you have protection, regardless of your credit history. Compare auto insurance rates from multiple companies at once for FREE!
Frequently Asked Questions: Will paying for car insurance build credit?
For the final section of the guide, we will go over some questions that you may have about auto insurance. Some of these questions may not relate directly to credit. If you have any questions about our guides, navigate our website, or simply write a comment below to voice any concerns about auto insurance.
#1 – Does paying your car insurance build credit?
The answer is no. Credit bureaus look at any new accounts, loans, and other aspects where you may have a payment history. Unfortunately, making auto insurance payments – or any insurance payments – is not a method you can use to build your credit score. If you’re wondering how to build credit, the best way is to make all of your payments on time, especially on loans and credit cards.
#2 – What if my credit history improves during my policy?
If you had poor credit during the time you enrolled in an auto insurance policy and your credit has recently improved, contact your auto insurance provider as soon as possible to lower your auto insurance rates.
#3 – What is an insurance credit history?
Insurance credit history shows the history of your business with auto insurance providers. This includes claims, payment history, and your previous insurance provider.
#4 – Can high-risk drivers have good credit?
How do you know if you need a high-risk auto insurance company? Some consumers in the U.S. are considered as high-risk despite their driving record. Doctors are some of the U.S. workforce employees that have exceptional credit but higher auto insurance rates because of their profession.
#5 – Will I receive a discount if I don’t have credit?
A few consumers don’t have a credit history at all. Auto insurance companies may be hesitant to offer them a policy. In case they do, they will have other discounts available for their potential customer.
#6 – Do I need full coverage when I lease a car?
It’s strongly recommended to enroll in full coverage auto insurance when you’re leasing a car. Full coverage is the combined coverage liability, collision, and comprehensive coverage. Some experts only include collision and comprehensive coverage as a full coverage, but these two coverages are commonly paired with liability.
In addition to the three basic coverages, additional liabilities such as uninsured and underinsured motorist coverage are bundled into the policy. Additional liabilities required by law are allocated to liability.
Other coverages, such as rental reimbursement and roadside assistance, are attached to full coverage.
Full coverage guarantees that the total cost of the car will be covered in case the vehicle is a total loss before the driver has a chance to pay the total balance of the vehicle. As a safety net to ensure the leased vehicle is paid for, lenders will insure the vehicle under force-placed insurance.
#7 – Does getting car insurance quotes affect credit score?
No. Car insurance company credit checks are what are known as soft credit checks. They don’t impact your score.
#8 – Does paying car insurance monthly affect my credit score?
No. As long as you are making the agreed-upon payments on time, it doesn’t matter whether you pay annually or monthly.
#9 – Can I receive a refund after my auto insurance is canceled?
If your auto insurance is canceled for nonpayment, you will not receive a refund. However, if you have prepaid for your auto insurance and want to cancel, you may be entitled to a refund.
#10 – Will not paying your health insurance hurt your credit?
Like auto insurance, paying health insurance premiums does not build your credit. Auto insurance and health insurance don’t lend money but have subscriptions to their services. Unfortunately, these subscriptions don’t affect your overall credit score.