Owning and operating a car isn’t cheap. Aside from paying for gas, maintenance, and repairs, you’ll likely need to buy an auto insurance policy. According to the National Association of Insurance Commissioners (NAIC), most states require some form of auto insurance.

Among other factors, insurance companies look at who you are and how you drive when evaluating your risk and calculating your rate. They also take into account your age, gender and marital status, as well as the make and model of your car, your personal driving record and accident history, and your annual mileage. Even factors like your education, zip code, and credit history could be considered.

Once an insurer determines your risk as an applicant and you are accepted, the insurance company uses a rating system to assign a price based on what it will cost to cover any potential claims.

Your insurance rate is also influenced by “claim frequency.” This doesn’t measure how often you make a claim but “how often an insured event occurs within a group relative to the number of policies contained in that group,” according to NAIC. In other words: People who are similar to those who make frequent claims may be charged a higher rate.

Generally, the more you drive and rack up the miles, the higher your premium will be, according to NAIC’s guide to buying car insurance. Your premium may also be determined by how many claims the insurance company has gotten in the past from your area. People living in urban areas often have higher rates than folks living in the suburbs or in rural areas, according to NAIC.

“Different companies weigh [these factors] differently, and insurance works at the state level,” says Mike Barry, a spokesman for the Insurance Information Institute (III), explaining why rates can vary so much from state to state—and why you could end up with a pricey policy.

Types of Coverage

Most insurers offer several types of auto coverage depending on individual needs, but the most common are liability, collision, and comprehensive.

Nearly all states require car owners to buy a minimum amount of liability coverage, which covers damages or injuries you cause to others, according to NAIC. This minimum varies by state.

“You will be responsible for any property damage or bodily injury you cause above
this amount, so think carefully before buying only the minimum,” according to NAIC’s guide to buying auto insurance.

The III’s most recent review of the NAIC’s figures on auto insurance found that in 2014, the average auto liability claim for property damage was $3,290. The average auto liability claim for bodily injury was almost five times higher, at $16,640.

“The payout dollars mostly go toward repairing people—bodily injury claims—rather than property,” says Barry of the III. “That’s why 49 out of 50 states insist people purchase minimum liability coverage.”

Unlike liability insurance in most states, collision coverage is usually optional. As the name indicates, this coverage pays to repair damage to your vehicle as a result of a collision.

Comprehensive coverage, another usually optional policy, pays for any damage to your car that is not a result of a collision. Scenarios covered under this policy can include theft, vandalism, and damage caused by natural or weather-related incidents.

According to the same III analysis of 2012 NAIC data, 77 percent of insured drivers bought comprehensive coverage in addition to liability insurance.

In some states, the average cost for car insurance is far above the national average. In 2012 (the latest figures available), the average price for auto insurance in the United States was $815, but in New Jersey, the average was much higher, at $1,219.93. These figures measure only what consumers actually spent for insurance on each vehicle. According to the III, “It does not equal the sum of liability, collision and comprehensive expenditures because not all policyholders purchase all three coverages.”

When budgeting for auto insurance, remember that it’s not one-size-fits-all. Before buying, be sure to research your options, shop around, and ask about any available discounts to ensure you’re safely covered without breaking the bank.