Understanding Car Insurance Costs in 2026
Car insurance is one of those expenses that's easy to overlook when budgeting for a new car. But it can add hundreds—even thousands—of dollars to your annual costs.
The average cost of car insurance in the US sits around $1,750 per year in 2026, though this varies dramatically by state and driver profile (Insurance Information Institute, 2026). In Michigan, for example, the average is closer to $3,400, while in Maine it's under $1,000.
Many shoppers overlook this: your credit score has a huge impact on your insurance rates. In most states, drivers with excellent credit pay 50% less than those with poor credit.
How Credit Score Affects Insurance Rates
This is one of the biggest hidden mistakes car buyers make—they don't realize how much their credit score impacts their insurance costs. Insurers use credit-based insurance scores to predict the likelihood of a claim.
The exact formula varies by insurer, but here's a general breakdown of how credit scores translate to insurance rates:
- Excellent (750+): Lowest rates, considered low risk
- Good (700-749): Slightly higher than excellent, still low risk
- Fair (650-699): Moderate rates, average risk
- Poor (600-649): Significantly higher rates, higher risk
- Bad (<600): Highest rates, highest risk
Numbers don't always tell the full story. Some states—like California, Hawaii, and Massachusetts—ban or restrict the use of credit scores in insurance pricing. If you live in one of these states, your credit won't affect your rates (NAIC, 2026).
State-by-State Average Insurance Costs
Insurance costs vary widely by state due to factors like population density, accident rates, weather risks, and state regulations.
Here are the most and least expensive states for car insurance in 2026:
Most Expensive States
- Michigan: $3,400 average annual premium
- Louisiana: $2,800 average annual premium
- Florida: $2,600 average annual premium
- Texas: $2,200 average annual premium
- Georgia: $2,100 average annual premium
Least Expensive States
- Maine: $980 average annual premium
- Vermont: $1,050 average annual premium
- New Hampshire: $1,100 average annual premium
- Idaho: $1,150 average annual premium
- Wisconsin: $1,200 average annual premium
It depends heavily on your personal situation, of course. A young driver in a large city will pay much more than an older driver in a rural area—even within the same state.
Case Study: David's Insurance Dilemma
David lives in Texas and has a credit score of 620 (poor). He's looking at buying a $30,000 SUV. The dealer quotes him a monthly payment of $550, but he hasn't factored in insurance.
When he gets an insurance quote, he's shocked−$220/month for full coverage. That's $2,640 per year, or 8.8% of the vehicle's value. His total monthly cost for the car is now $770, not $550.
David works on improving his credit and gets it up to 720 (good) over the next year. When he renews his insurance, his premium drops to $145/month—a savings of $75/month, or $900 per year.
Was it worth it? Absolutely. Improving his credit saved him enough to cover nearly three months of car payments.
How to Lower Your Insurance Costs
Here are some strategies to reduce your car insurance premiums:
- Improve your credit – This is the single biggest factor in most states. Pay bills on time, reduce debt, and check your credit report for errors.
- Shop around – Different insurers offer different rates for the same coverage. Get quotes from at least 3-5 companies.
- Increase your deductible – A higher deductible means lower premiums, but you'll pay more out of pocket if you have a claim.
- Bundle policies – Many insurers offer discounts for bundling auto and home insurance.
- Choose a less expensive car to insure – Sports cars and luxury vehicles cost more to insure than sedans and SUVs.
Should You Buy Full Coverage or Minimum Coverage?
Realistically, it depends on the value of your car and your financial situation. If you have a new or expensive car, full coverage is probably worth it. If you have an older car with low value, minimum coverage might be sufficient.
Does this mean minimum coverage is always cheaper? Not necessarily. Some insurers offer better rates for full coverage, especially if you have a clean driving record. It's always worth getting quotes for both.
EV Insurance Costs
Electric vehicles tend to cost slightly more to insure than gas-powered cars. This is because EVs have more expensive parts (like batteries) and specialized repair requirements.
On average, EV insurance costs about 10-15% more than comparable gas cars. However, this gap is narrowing as more EVs are on the road and repair costs come down (III, 2026).
FAQ
Does my credit score affect my car insurance rate?
In most states, yes. Insurers use credit-based insurance scores to determine rates. However, California, Hawaii, Massachusetts, and a few other states restrict or ban the use of credit scores in insurance pricing.
How much does car insurance cost per month?
The national average is about $146 per month for full coverage and $52 per month for minimum coverage. However, this varies widely by state, driver profile, and coverage level.
What's the cheapest car insurance company?
There's no one-size-fits-all answer. Different companies offer the best rates for different drivers. It's important to shop around and get quotes from multiple insurers.
Does my car's value affect my insurance rate?
Yes, more expensive cars cost more to insure because they're more expensive to repair or replace. Sports cars and luxury vehicles also tend to have higher rates due to higher theft and accident rates.
Can I get car insurance with bad credit?
Yes, but you'll pay significantly higher rates. Some companies specialize in insuring drivers with bad credit, but their rates are typically much higher than standard insurers.