Sara Routhier, Managing Editor of Features and Outreach, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming worl...

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Sep 15, 2020

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Key takeaways...

  • Price is the determining factor for 64% of auto insurance consumers
  • Understanding your auto coverage can save you over $150 a year
  • Nearly a third of the consumers we tested on basic terms, failed
  • Take the quiz below to see how well you are closing the knowledge gap

Even if you have a flawless driving record, car insurance premiums have a nasty habit of going up. 

Shop around, and you’ll quickly find that rates can vary by hundreds of dollars depending on a myriad of factors such as where you live and how you drive. 

Determining which quote offers the best value for your money can be challenging – especially if you’re not up to speed with car insurance jargon. 

Car Insurance Knowledge Gap: Could it Pay to Know More About Your Car Insurance?

To discover how knowledgeable consumers are when it comes to car insurance, we quizzed 1,007 insured drivers on relevant terms, practices, and factors that can potentially affect premiums.

Read on, and you’ll discover that the more you know about car insurance, the less you could pay for it!

Table of Contents

Does it pay to know more about car insurance?

According to a study by J.D. Power, 64% of consumers cited price as the determining factor when shopping for car insurance. 

But is getting a good deal a case of luck or careful research? According to the results of our survey, it pays to be a smart cookie. The more you know, the lower your premiums could be.


Perceived Knowledge of Car Insurance Average Monthly Premium
Not at all or slightly knowledgeable 15.4% $194
Somewhat knowledgeable 41.3% $171
Extremely or very knowledgeable 43.4% $181
30.1% of drivers didn’t know their deductible amount. 12.9% didn’t know their monthly premium amount.

Source: Survey of 1,007 Insured Drivers


 

For example, over 43% of drivers in our survey felt they were highly knowledgeable when it comes to car insurance. This confident band of motorists paid an average monthly premium of $181.

Conversely, drivers who confessed to having little or no knowledge of car insurance paid an average monthly premium of $194—that’s $156 more a year!

Furthermore, just over 15% of drivers said they had little or no knowledge of car insurance, and almost 13% of respondents didn’t know their monthly premium amount.

Clearly, it pays to learn more about car insurance coverage before you grab your wallet.

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Secret to Driving Down Car Insurance Costs  

To test our participants’ knowledge of major car insurance terms, we asked them to take a short quiz. 

Surprisingly, the majority of respondents barely passed. Over 30%, in fact, completely failed! The average grade across the board? A disappointing D+.

Testing Car Insurance IQ: On average, drivers surveyed scored a D+ on a brief car insurance quiz.

Once again, the most clued-up participants paid the lowest premiums on average. At the top of the class, straight-A drivers paid an average of just $139 a month. The worst-performing students, however, paid $216 a month.

Do the math, and you’ll find that the least-knowledgeable drivers could fork out an extra $924 a year.

Want to see how well you fare on a similar insurance knowledge quiz? Test your smarts with our interactive test!

Surprising Factors that Impact Your Premium

Insurers typically start by asking for your ZIP code; understandable, given that where you live is the basis for most car insurance rates.

But did you know that even things like the local weather in your area could impact the cost of your premium? 

Factors that Affect Your Rates: the percentage of drivers who correctly and incorrectly identified the factors that impact your car insurance rates.

A reassuring fraction of our respondents identified age and at-fault accident history as prime factors when pricing car insurance. But fewer were aware that occupation, education, and even local crime rate could affect premiums.

Around 10% incorrectly indicated that either disability status or a failure to pay tolls could contribute to their monthly expense.

Over half of respondents were surprised to learn that gender is taken into account. To address this, California recently joined six other states in banning the use of gender when pricing car insurance.

Additionally, a bombshell report by ProPublica alleged that some insurers charged higher premiums to drivers in neighborhoods with more racial minorities.

Insurers often offer discounts to groups of people defined by criteria such as education and income. While critics say this systematically discriminates against minorities and low-income neighborhoods, industry insiders assert that any price disparity between ZIP codes is due to mileage and accident rates.

Understanding Car Insurance Jargon – and State Laws

Almost all drivers – 98% of respondents – knew that the purpose of insurance was to provide financial liability coverage in the event of an accident or injury. But even the most common terms can be confusing.

Nearly 7% of respondents thought a “premium” was the amount paid to another driver in the case of a crash, while over 8% of drivers confused the term “deductible” with “premium” . . . these are essential insurance terms to understand.

Identifying Car Insurance Terms: Perceived Insurance Terms and Rules

State-specific laws add a whole new layer of complexity. Reassuringly, over 96% of respondents living in states where car insurance is required knew of the requirement.

There are only two states where car insurance (or an alternative) is not required by law. 

Vehicle owners in New Hampshire can skip car insurance but they are still responsible to cover up to $50,000 for liability in the event of an accident. 

Virginian drivers can opt to pay an uninsured motorist fee of only $500 a year to the state. That may sound like a good deal, but the driver who caused the accident will still be liable for the cost of repairs, legal bills, and medical expenses.

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Understand Your Coverage … Before It’s Too Late

Crashing a vehicle is stressful – but finding out that you don’t have the coverage you thought you had could make matters considerably worse.

Few consumers read the fine print, so it’s no surprise that drivers had a tough time identifying the purpose of different types of coverage.

Defining Coverage Types: Percentage of drivers who correctly and incorrectly identified collision, property damage liability, and comprehensive coverage. ance coverage types.

Only half of respondents knew that comprehensive coverage usually covers all risks not caused by a collision with another car.

Let’s imagine that you’ve had an accident. What type of insurance would cover the damage to the other party’s vehicle? 

The majority of drivers wrongly believed that collision insurance would cover the costs. Only 33.5% of drivers gave the correct answer: property damage liability.

This worrying disconnect between the coverage you think you have and the coverage you actually have could prove costly and frustrating.

How confident are you that you have adequate insurance?

Our study revealed that over 91% of drivers were confident they had adequate coverage. But when it comes to car insurance, there’s no one-size-fits-all coverage. 

Coverage Knowledge: Drivers attempt to identify the types of car insurance coverage they currently have.

Regulations vary from state to state, and it’s your responsibility to know the rules. Failure to maintain the correct level of coverage could leave you in violation of the law.

For example, half of the drivers surveyed didn’t think they had personal injury protection – which is required by law in many states.

Don’t assume your existing insurer is meeting the minimum requirements in your state. Every couple of months, take a few moments to review your policies and make sure you have what you need to protect yourself and your vehicle.

11.7% of drivers didn't know how to file a claim. 15.6% of millennial drivers said they didn't know how to file a claim.

If the worst-case scenario does happen, though, it is essential to know how to file a claim with your car insurance company.

Although nearly 12% of drivers didn’t know how to file a claim, many insurance companies make the process incredibly simple by allowing you to file a claim via a mobile app.

Never try to settle an accident involving other drivers on your own, although it may be tempting to avoid your insurance company. In the long run, you may be at risk for costly lawsuits and scams.

Take Your Inspiration From “Driving Miss Daisy”

There were more than 40,000 fatalities resulting from U.S. car crashes in 2018, and driver-related factors like distracted driving were present in almost 90% of them. 

Our quiz revealed that the safest drivers – those not involved in an accident in the past year – knew the most about car insurance. On average, these drivers nailed the correct answer to 70% of our questions.

Average Car Insurance Quiz Scores By Number of Accidents and Claims Filed in the Last Year, and Generation

Conversely, drivers involved in two or more accidents in the past year proved to be the least knowledgeable. They posted an average score of just over 50%.

The takeaway? Conscientious drivers on the road are equally conscientious when it comes to their car insurance coverage.

As far as generational divides, baby boomers posted a score of 74%. This is hardly surprising, as the Insurance Institute for Highway Safety says middle-aged drivers have the best record when it comes to accidents compared to the youngest and oldest drivers. 

Millennials fared the worst in our quiz, scoring just over 64%, and drivers in this age group are more likely to be involved in an accident, too. According to research by AAA, drivers aged 19 to 24 tend to exceed speed limits and send text messages while behind the wheel.

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Conclusion

No matter your age, driving record, or home state, our study indicates that drivers may be able to dial down their premiums by dialing up their car insurance know-how

Sure, drivers who felt they knew the most paid the lowest monthly premiums on average, but given the average grade in our quiz (D+), we could all be savvier when it comes to car insurance. Fill in those knowledge gaps and you can quickly fill up with savings.

CarInsuranceCompanies.com makes it fast and easy to compare quotes and find coverage that meets your needs. Ready to get started? Click here to use our free online tool to compare quotes from dozens of top car insurance companies – and start saving today!

Methodology

We surveyed 1,007 drivers who had current and valid automobile insurance using Amazon’s Mechanical Turk service. We asked them to report information about their car insurance and take a nine-question quiz to test their knowledge of how car insurance works.

Participants ranged in age from 18 to 83 with a mean age of 37.8 and a standard deviation of 11.8. In regards to gender, 51.8% of participants were men, 48.0% were women, and fewer than 1% were non-binary or preferred not to specify their gender. 

Outliers in the monthly premium payment were excluded from the analysis. 

Limitations

Many aspects go into having an understanding of car insurance, which cannot be fully assessed with a short quiz. As such, our findings are based on means alone and are purely exploratory. Additionally, the interactive quiz available to our readers is based on the quiz used in our study, but due to technical limitations, it is not identical.

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Fair Use Statement

If you found this article and survey beneficial, feel free to share our findings with friends and family for noncommercial use. In return, we ask that you link back to this page and credit CarInsuranceCompanies.com. That way, everyone can save money when buying car insurance coverage.