If you use insulin and you’re eligible for Medicare Part D prescription drug coverage, a new government program may help you save a lot of money on your medicine next year.
Under the Part D Senior Savings Model, Medicare recipients in participating plans will pay no more than a $35 copay for a month’s supply of insulin. The change is an effort to combat the dramatic rise in insulin prices and the subsequent burden on seniors with diabetes. People with Medicare Part D paid $984 million out-of-pocket for insulin products in 2017, quadrupling the amount paid 10 years earlier, according to an analysis from the Kaiser Family Foundation.
Diabetes is most common among people 65 and older, and more than one third of Medicare recipients have diabetes, reports the foundation. The Centers for Medicare and Medicaid Services, or CMS, estimates the Senior Savings Model could save people with diabetes an average of $446 annually, or 66%, in out-of-pocket insulin costs.
More than 1,750 Medicare Part D prescription drug plans and Medicare Advantage Plans with prescription drug coverage in all 50 states applied to be part of the new program in time for the 2021 open enrollment period going on through Dec. 7, according to CMS. That means it’s worth checking to see if a plan in your coverage area will offer the new price.
Welcome as savings on insulin are, the rollout of the new plan has come with plenty of caveats. Different insurers are classifying the program in different ways, so it can be hard to tell if your current plan or plans you are considering offer the lower prices. And even if you find a participating plan, it may not cover the type of insulin you are currently prescribed.
It’s great to see affordable insulin, says Sue A. Greeno, a Medicare advocate at the Center for Medicare Advocacy, “but there’s still a lot of confusion when it comes to choosing prescription drug coverage.”
Here’s what diabetes patients need to know to make the most of their Medicare Part D prescription drug coverage.
How Medicare Part D works
You can purchase Medicare Part D prescription drug coverage in two ways — through a stand-alone Medicare Part D plan or via a Medicare Advantage Plan that includes Part D prescription drug coverage. Both types of plans are sold by private insurers.
All plans must meet a standard level of coverage set by Medicare. This means they must cover the same categories of drugs, such as diabetes medicines, but plans can choose which specific drugs are covered in each category. That said, they must include at least two drugs in the most commonly prescribed categories.
For diabetes drugs, Medicare Part D plans are required to cover injectable and inhaled insulins. (External insulin pumps and the insulin may be covered under Medicare Part B.) The Senior Savings Model is available only through what’s known as enhanced Medicare Part D plans. These often come with slightly higher premiums but cover a wider variety of medicines.
What you’ll pay for insulin with Senior Savings
The new program changes the complicated formula used to determine what insurers and manufacturers can charge for insulin products in a way that reduces the patients’ costs. In addition, with the new program, insulin copays aren’t subject to deductibles or what’s known as the coverage gap.
The coverage gap kicks in when you and your insurer have paid $4,130 in prescription drug costs for plan year 2021. After that, you are responsible for 25% of all of your medicine costs. With insulin, however, members of participating plans continue to pay only the monthly copay up to $35.
Once Medicare beneficiaries spend a total of $6,550 out-of-pocket on prescription drugs in 2021, (not including the insurer’s portion), they enter Part D’s catastrophic coverage phase. In this phase, out-of-pocket drug costs are drastically reduced and people with diabetes will pay 5% of insulin costs, whether or not they are in a plan with the Senior Savings Model.
What to look for when comparing plans
You can look for Medicare Part D and Medicare Advantage plans that are participating in the new program on Medicare.gov’s plan finder. The tool allows you to screen for the Medicare Part D and Medicare Advantage plans with Part D coverage offered in your area. When using the tool, you can enter the list of medicines you take, including insulin. And you can filter for plans that are part of the Senior Savings Model. (Click on “Filter Plans,” then check the insulin savings box.)
Keep in mind these are early days and insurers are testing the program with limited rollouts. Aetna, for example, is focusing mainly on Florida. “Aetna is participating in limited geographic areas at first,” says Christopher Ciano, president of Aetna Medicare. “We want to learn if the program has long-term viability that will drive savings.”
If you do find participating plans, be sure to look at the plan details to make sure the type of insulin you take is on the list of drugs covered by the insurers in your search. This list is also called a formulary. You’ll be able to compare prices at up to five pharmacies in your area, including a mail order option. You may find a variety of copays among pharmacies with some charging the full $35 maximum for a monthly dose of insulin while others charge much less.
Finally, be sure to compare all the plans that come up in your search carefully, even those that don’t participate in the insulin savings program. Depending on what other medications you take and the cost of the type of insulin you need, you may find that a plan with low or no deductibles and low copays on all of your medicines may be less expensive than a plan in the Senior Savings Model that may have high out-of-pocket costs for your other prescription drugs.
For help finding Medicare coverage, contact your local State Health Assistance Program or your local senior center for help.
Imagine that you’ve had an offer accepted on the house of your dreams and you think you’re ready to close. Suddenly, your lender demands to see proof that you have hazard insurance.
What do you do? You knew that you would have to get homeowners insurance as part of the mortgage closing process, but hazard insurance too?
Don’t worry. Chances are, you’re already covered.
What is hazard insurance?
Hazard insurance is part of your homeowners insurance policy. It covers damage to the physical structure of your house caused by a hazard such as fire or hail, and it doesn’t require separate coverage.
Lenders typically use the term “hazard insurance” to refer to coverage specifically for the physical structure of your house. They want to ensure that their investment is protected, so they will often require you to have certain amounts of coverage before approving your loan.
» MORE: What is the average cost of homeowners insurance?
What does hazard insurance cover?
Hazard insurance pays for damage to your home caused by a named peril. The number of perils covered varies depending on your policy and typically includes:
Fire or lightning.
Windstorm or hail.
Damage from aircraft.
Damage caused by vehicles.
Weight of ice, snow and sleet.
Water overflow or discharge from household systems like plumbing, air conditioning and appliances.
Freezing of those same household systems.
Sudden damage from a power surge.
Sudden tearing, cracking or bulging of a hot water system, steam system, air conditioning or fire-protective system.
Importantly, there are several types of peril that hazard insurance doesn’t pay for. Coverage for these disasters has to be purchased separately:
» MORE: The best cheap homeowners insurance for 2020
How much does hazard insurance cost?
Because it is part of your homeowners insurance coverage, hazard insurance doesn’t cost extra if you already have a standard policy. When it comes to the cost of your home insurance policy, factors such as the size of your insurance deductible, the cost to rebuild the home and the total amount of coverage all affect your premium.
Adding coverage for perils not typically included in a homeowners policy — such as flooding or earthquakes — will also cost extra. To make sure you’re getting the best home insurance quotes, shop around and compare prices between companies.
Homeownership is already expensive, so why pay more than you need to for your homeowners insurance? Don’t settle for an expensive rate; cheap homeowners insurance can include great coverage too.
NerdWallet analyzed pricing data from 145 insurance companies to find relatively cheap home insurance in every state, as well as the country’s largest cities. The rates below are based on a homeowners insurance policy for a 40-year-old homeowner with a $1,000 deductible, $300,000 in dwelling coverage and $300,000 in liability coverage, but your rates will differ.
Cheap homeowners insurance from top-rated companies
NerdWallet looked at average rates from some of our top-rated insurance companies to find out which ones have the most affordable homeowners insurance premiums.
Use the table below to see average annual and monthly rates, along with our star rating.
NerdWallet rating for homeowners insurance
Average annual rate
Average monthly rate
*USAA is available only to military, veterans and their families.
» MORE: What is the average cost of homeowners insurance?
Cheap home insurance in each state
Where you live typically has a big impact on the cost of insurance for your house and possessions. How close you live to the coast, crime rates in your area, population density and more can all influence your rate. Use the map below to see the lowest cost home insurance in each state and its average annual rate.
Below are the most affordable homeowners insurance companies for each state, along with average annual and monthly rates. USAA was the cheapest home insurance provider in some states but was excluded from the list since its products and services are available only to those in the military, veterans and their families.
Cheapest company on average
Average annual rate
Average monthly rate
Arkansas Farm Bureau
Grange Insurance Association
Auto Club of SoCal
Farmers Mutual of Nebraska
New York Central Mutual
Mutual of Enumclaw
Farmers Mutual of Nebraska
» MORE: The best homeowners insurance companies for 2021
Cheap homeowners insurance in the largest U.S. cities
Cheap homeowners insurance isn’t necessarily going to come from the same company in Boston as it will in Chicago, so we looked at the top 20 metropolitan areas in the country to find the lowest homeowners insurance premium in each city, on average.
Use the table below to find the cheapest home insurance in your city, along with average annual and monthly rates.
Average annual rate
Average monthly rate
New York City
New York Central Mutual
Auto Club of SoCal
How to get cheap homeowners insurance
Some take a little more effort than others, but there are a variety of ways to get cheap insurance for your house and possessions. Below are some of the most common ways to save on home insurance.
Shop around. Don’t buy the first policy you get a quote for — compare rates from multiple companies in your area to find an affordable policy from a reputable company. Our guide to the best homeowners insurance companies can get you started.
Insure your home for the proper amount. Don’t insure your home based on its current market value (that is, how much the home could sell for) — you should actually insure it based on how much it would cost to rebuild your home in the event of a claim. Have your home insurance agent or company estimate your home’s replacement cost so you can insure your house for the correct amount.
» MORE: How to save on homeowners insurance
Bundle your policies. Many carriers offer a discount if you bundle home and auto insurance together to make both policies more affordable.
Increase your deductible. You can lower your premium by choosing a higher deductible, but make sure you have enough cash to cover it should you need to file a claim.
Avoid filing small claims. Most home insurance companies offer a discount for customers who haven’t filed a claim in the last three to five years. If you can, pay cash for home repairs and file a claim only when absolutely necessary to avoid rate hikes.
Avoid risky purchases. Anything considered a high risk for a liability claim, including trampolines and aggressive dog breeds, could raise the cost of your homeowners insurance. So think twice about adding that swimming pool if you want cheap coverage.
» MORE: Does homeowners insurance cover dog bites?
Add safety features to your home. Making your home safer now may save you money on home insurance in the long run. Many insurance companies offer discounts for features that protect your home against fire and theft. Fire extinguishers, deadbolts, security systems and more could all help keep costs low.
Improve your credit. Poor credit generally translates to high insurance costs, including for homeowners insurance. While not an overnight fix, you can rebuild credit by making payments on time and using less than 10% of your total credit card limits, if possible.
» MORE: What to know about a credit-based insurance score
Renters liability insurance is the section of a renters policy that covers you if you cause harm to others through an accident or negligence.
Personal liability renters insurance may pay for legal costs if you’re sued for situations such as accidents within your home or dog bites.
Personal liability insurance for renters isn’t mandated by law, but your landlord may require renters insurance in order to sign your lease.
Few people expect to be the target of a lawsuit, but if it ever happens to you, it could cost you dearly. Between damages and legal fees, you could end up owing tens or even hundreds of thousands of dollars. If you’d have a hard time paying that much money out of pocket, you might want renters liability insurance.
What is renters liability insurance?
Renters liability insurance is the part of a renters policy that covers you if you cause injuries to other people or damage to their property.
For example, say you’re playing softball in the yard behind your rental house, and your 12-year-old daughter hits a home run right through your neighbor’s kitchen window. If your neighbor sues you and you’re judged to be at fault, your liability coverage could pay for things like repairing the broken window and treating any injuries, up to your coverage limit. It also might pay your legal fees.
Personal liability coverage is usually sold as part of a renters insurance policy that also has other types of coverage. These generally include:
Personal property coverage, which pays out if your belongings are stolen or damaged in a disaster.
Additional living expenses coverage, which pays for hotel bills and other costs if you have to move out while your home undergoes covered repairs.
» MORE: What is renters insurance, and what does it cover?
While you usually have to pay a deductible before your personal property coverage comes into effect, there’s generally no deductible on liability claims.
If you’re not interested in a standard renters policy, you may be able to purchase liability coverage on its own. For example, Assurant offers a liability-only policy to tenants living in the company’s partner properties across the U.S. It won’t cover your personal belongings as a renters policy would, but it will cover your liability if you cause a fire or other accident, or your dog bites a guest.
Is renters liability insurance required?
Unlike auto insurance, where minimum liability coverage is required in most states, renters insurance typically is not mandated by law. However, your landlord might require renters insurance — or at least a minimum amount of personal liability insurance — as a condition of your lease. The average cost of renters insurance is about $14 per month, according to NerdWallet’s most recent rate analysis.
If you’re trying to decide between purchasing personal liability-only insurance and a standard renters insurance policy, consider these differences:
Personal liability insurance
Covers only damage you do to others or their belongings.
Generally covers personal liability plus your own belongings and expenses associated with living away from home during covered repairs.
Liability-only insurance for renters can be difficult to find, as standard renters policies are more common.
Widely available from many insurance companies.
» MORE: 6 reasons not to skip renters insurance
Renters insurance liability coverage
The key thing to remember about personal liability renters insurance is that it covers other people and their belongings — not you and yours. For example, if your dog bites someone outside your household, your liability insurance will likely pay for their injuries, as long as your insurer doesn’t exclude that breed. If your dog bites you, though, you’ll have to turn to your own health insurance for coverage.Nerdy tip: Did you know that the average dog-related injury claim is nearly $50,000? (That’s according to State Farm data.) Learn more about why your dog needs liability insurance.
Here are a few other scenarios that may be covered by personal liability insurance for renters:
Falls and injuries in your home. Example: A visiting friend trips over an extension cord in your apartment, breaks his or her wrist and sues you for medical expenses.
Damage that originates in your home and affects others’ property. Example: A grease fire in your kitchen causes damage to the unit next door.
Damage to other people’s property for which you’re responsible. Example: Your child accidentally breaks a priceless vase while at a friend’s house.
Liability related to social events you host. Example: A guest at your house party has too much to drink and gets into an accident on the way home, causing injuries to passengers in another car. (While your guest’s auto liability coverage might also kick in here, in some states the host who supplied the alcohol can be found liable for such an accident.)
» MORE: The best cheap renters insurance
What isn’t covered by personal liability renters insurance?
Like any other type of insurance, renters liability coverage has limitations. Here are a few scenarios that would not be covered by your renters liability insurance, and which alternative types of insurance could help instead:
Injuries in common areas. Example: A guest slips and falls on an icy sidewalk outside your apartment building. His or her medical expenses would likely be covered by your landlord’s liability insurance, not yours, because the injury happened in an area that the landlord was responsible for maintaining.
Car accidents. Example: You’re at fault for a wreck that injures two people in another vehicle. The other parties’ medical bills and repair costs will be covered by your liability car insurance, not your renters policy.
Damage to your belongings. Example: A thief breaks into your apartment and steals your laptop, TV and jewelry. This scenario would fall under the personal property coverage in your renters policy, not liability.
Business liability. Example: A client sues you over a problem arising from your home-based business. Renters insurance typically covers only personal liability claims, not those related to a business; you’ll need a commercial policy to handle this type of issue.
Intentional acts. Example: You deliberately throw a rock and break someone else’s window. That’s a crime, not an accident, and your liability insurance almost certainly won’t cover you.
» MORE: Renters insurance quotes: What you need to know
How much renters liability insurance do you need?
Most renters policies offer liability coverage limits ranging from $100,000 to $500,000. If you’re not sure how much to choose, a good guideline is to add up your net worth, including the value of your car, bank accounts and retirement savings. By selecting at least enough liability insurance to cover that amount, you’ll reduce the chances of a lawsuit wiping out all your assets.
If you’re expecting your net worth to go up in the near future — for example, if you just landed a better-paying job — you might want to increase your liability limit accordingly. Because renters insurance is generally so inexpensive, you might be surprised by how little it costs to increase your coverage.Nerdy tip: If you need more than the maximum amount of liability coverage from your insurer, consider purchasing umbrella insurance. This type of insurance offers additional liability coverage above and beyond the coverage on your renters, auto or other policies.
You may have heard of Medicare Advantage Plans, but do you know how to shop for one (or how they fit into the Medicare universe)?
Medicare Advantage Plans are an “all-in-one” alternative to Original Medicare — meaning they replace Medicare Part A (hospital coverage), Medicare Part B (medical insurance) and often Medicare Part D (drug coverage). Also known as Medicare Part C or MA Plans, they’re offered by private insurers that have been approved by Medicare. Most plans offer additional benefits that aren’t covered under Original Medicare, which may include dental, hearing and vision coverage. You’ll probably be required to stick with doctors in the plan’s network, but out-of-pocket costs may be lower.
Where should you start?
The best place to start shopping for Medicare Advantage Plans (or a Part D or Medigap policy) is Medicare’s Plan Finder tool. After answering a few questions about your location and any financial help you might be receiving — from Medicaid, for instance — the tool will show you all available plans that meet your criteria.
If you want to see drug costs when you compare plans, you can enter the name, dosage, quantity and frequency for each drug you take regularly — and even the pharmacy where you get prescriptions filled. The final list will then be populated with your expected drug costs in each plan. Filter plans by available benefits, plan type, ratings, insurance carrier and drug coverage options. Select up to three plans for side-by-side comparison.
If you’re a little overwhelmed by online tools, you can find live human help from State Health Insurance Assistance Programs (called the SHIP network). “It’s basically the equivalent of a hotline or in-person counseling,” says Riaz Ali, CEO and founder of health care solutions company Saeidan and creator of plan comparison site Ask Claire. “They will not recommend a plan, but they can help you through the process.” Each state has its own SHIP program — find your local program at shiptacenter.org.
What Medicare Advantage Plans are available?
There are five types of Medicare Advantage Plans:
Health maintenance organization, or HMO, plans: Require you to see an in-network provider unless it’s an emergency situation, and most require a referral to see a specialist.
Preferred provider organization, or PPO, plans: Allow you to see both in-network and out-of-network health care providers, although it’s usually more expensive to go out of network.
Private fee-for-service, or PFFS, plans: Allow you to see any Medicare-approved health care provider as long as they accept the plan’s payment terms and agree to see you. You may also have access to a network of providers. You can see doctors that don’t accept the plan’s payment terms, but you might pay more.
Special needs plans, or SNPs: Provide benefits to people with certain diseases, such as cancer, or health care needs, such as living in a nursing home. These plans also provide benefits to people with a limited income.
Medical savings account, or MSA, plans: Combine a high-deductible insurance plan with a medical savings account that can be used for health care costs.
What should you consider?
While you might not have an abundance of Medicare Advantage options if you live in a rural area, urban dwellers could have two dozen or more choices available. Narrow the field with these strategies:
Find the star rating. Medicare collects data on Medicare Advantage Plans from member surveys, the plans themselves and health care providers, then assigns a star rating based on its findings. “It’s based on performance on a range of different things to do with quality, including things like, ‘How responsive is the plan to any complaints or questions?’” says Anne Tumlinson, CEO of health care research and consulting firm ATI Advisory. The star rating goes from 1 to 5 stars, with 5 stars being excellent.
Check the numbers. The two primary cost considerations are a plan’s premium and the maximum out-of-pocket cost, which is the most you’ll pay in a year for covered health care. “That’s usually something people care a lot about,” Ali says.
Consider your meds. The Medicare Plan Finder and some private comparison sites allow you to enter your regular prescriptions to help determine plan coverage and cost.
Cross-reference your health care providers. If you’ve got a regular network of caregivers and medical facilities, you’ll probably want a plan that includes them.
Think about your preferences. If you see specialists frequently and you don’t want to request a referral for every office visit, a PPO plan will be a better option than an HMO. If you’re a light health care user and see mostly your primary care physician, an HMO might be more affordable.
Visit the plan’s website. Before you pull the trigger on a plan, go to the provider’s website and make sure you understand all the benefits — and limitations. “What we’re seeing is that plans are offering these new and different benefits, like in-home palliative care,” Tumlinson says. Those are exciting and, if you have a need, they’re something to consider. But these new benefits are often quite limited, so check the plan directly.
Call the carriers. Ali goes one step further, advising consumers to call a carrier directly if you’re thinking of enrolling or switching to their plan. “We believe the truest source comes directly from the carrier themselves,” Ali says. “If you’re interested in switching, connect with those carriers. Do one additional step of due diligence.”
Get more information about:
Aetna’s 2021 Medicare Advantage plans
Humana’s 2021 Medicare Advantage plans
UnitedHealthcare’s 2021 Medicare Advantage plans
When can you sign up?
You can enroll in a Medicare Advantage Plan (or switch from one to another) during the following windows:
During your initial enrollment period.
Each year during open enrollment from Oct. 15 to Dec. 7.
From Jan. 1 to March 31, during Medicare Advantage open enrollment, you can switch from one MA Plan to another (but you can’t enroll in an MA plan if you aren’t already in one).
If you are switching plans, you’ll be automatically unenrolled from your old plan once your new one starts.
You won’t find outpatient drug coverage in Medicare Part A or Part B, even though medicines are a large percentage of many seniors’ health care budgets. That’s one reason why, starting in 2006, Medicare began offering Part D, an optional program that helps cover the cost of prescription drugs.
Prescription drug plans are offered by private insurers approved by Medicare. Most recipients pay a monthly premium and various cost-sharing responsibilities, such as copays and deductibles. Signing up on time is important because you may pay a late penalty if you don’t sign up when you are first eligible, usually around your 65th birthday.
You can sign up for Medicare Part D in two ways:
Medicare Part D stand-alone plans
If you have Original Medicare, you can enroll separately in a Part D plan during your initial enrollment or during the annual Medicare open enrollment period, which continues through Dec. 7.
Medicare drug plans cover generic and brand-name drugs. All plans must cover the same drug categories, such as asthma or diabetes medicines, but providers can choose which specific drugs are covered in each drug category.
Each Medicare Part D plan has a formulary — a list of medicines it covers. This list will likely include both brand-name and generic drugs and at least two drugs in the most commonly prescribed categories. Formularies change from year to year and even within the year.
Some Medicare D plans have restrictions, including authorization before a drug is prescribed and step therapy, which requires generic and lower-cost brand-name drugs before the most expensive drug is used.
Premiums for stand-alone Medicare Part D vary, and deductibles for plan year 2021 can be no more than $445.
Medicare Advantage Plans with Part D coverage
Medicare Advantage Plans are also sold by private insurers and provide the same coverage found in Original Medicare Part A and Part B. Many provide extra benefits such as some dental and vision coverage. A large percentage of Medicare Advantage Plans include Part D prescription drug coverage.
As with stand-alone plans, each Medicare Advantage Plan that includes Part D coverage has its own formulary and also may have restrictions.
Many Medicare Advantage Plans offer drug coverage for $0 premiums but may still charge an overall premium for the plan.
If you choose a Medicare Advantage Plan that doesn’t include Part D coverage, you may buy a stand-alone Part D plan.
Costs for either type of Part D coverage
You may pay premiums for Part D coverage, and you’ll be responsible for cost sharing, including deductibles, copays or coinsurance.
There are also some other cost-sharing rules that may affect you.
In 2021, when you and your insurer have paid $4,130 in covered prescription drug costs, you’ll hit what’s known as the Medicare “donut hole.” During this phase of coverage, you must pay 25% of all prescriptions until you’ve spent $6,550 in out-of-pocket costs, at which point you enter “catastrophic coverage.”
In the catastrophic coverage phase, you’ll pay 5% of the cost of your drugs, or $3.70 for generics and $9.20 for brand-name drugs, whichever is more.
You have a flawless driving record, never had a gap in coverage and are the only one on your policy. Yet your car insurance rates still are higher than all your utility bills combined. One possible culprit? Having poor credit, or, more specifically, a low credit-based insurance score.
What is a credit-based insurance score?
Your credit-based insurance score, or insurance credit score, is used to determine how likely you are to file a claim. It gives insurers an idea of how big of a risk you are to cover, and helps them decide how much to charge you for coverage.
These credit based-insurance scoring models, created by data analytics companies like LexisNexis and FICO, have proven to be fairly accurate. A 2003 study from the University of Texas showed drivers with the worst insurance scores are twice as likely to file an insurance claim when compared with drivers with the best scores, according to TransUnion.
Surprisingly, in some cases, poor credit can increase your car insurance rates more than a recent DUI. In fact, rates for drivers with poor credit are 75% higher, on average, than for people with good credit, according to NerdWallet’s 2020 rate analysis.
Besides auto, a credit-based insurance score can be used to determine other types of coverage such as home and renters. Generally, however, you’ll get a separate score for each insurance type, although some companies, like LexisNexis, offer scores that can be used across multiple lines of insurance.
While using credit-based insurance scores to calculate rates is legal on the federal level, insurance companies typically aren’t allowed to use credit history as the sole reason for increasing rates or denying or canceling a policy. Four states — California, Hawaii, Massachusetts and Michigan — have banned insurers from using credit scores to set rates.
Credit-based insurance score vs. regular credit score
Your insurance credit score isn’t the same as the more commonly known VantageScore or FICO credit score that’s used when you apply for a mortgage, credit card or auto loan. However, the factors used to determine your score are the same, just weighted differently. That’s because a credit score is meant to estimate the likelihood you’ll pay your debts, while the credit-based insurance score looks at how likely it is you’ll file an insurance claim.
Because more than one company can issue a credit-based insurance score, your rating may differ from company to company. Regardless of the company, the higher your score, the better.
Factors that are used to create a credit-based insurance score are similar for both LexisNexis and FICO but may differ when it comes to weighting. For example, below is a breakdown of how FICO weighs insurance credit scores, according to the National Association of Insurance Commissioners (NAIC):
Payment history (40%): How you made payments on your debt in the past, including frequency and the amount paid off.
Outstanding debt (30%)*: Amount of debt you have.
Credit history length (15%): Amount of time you have had a line of credit.
Pursuit of new credit (10%): Looks at if you have recently applied for new lines of credit.
Credit mix (5%): The kinds of credit you have, including credit card, mortgage or auto loans.
Based on the categories above, the following could negatively impact your insurance credit score:
Having little to no credit history.
Too many hard credit inquiries. (A hard credit pull occurs when you apply for an auto, student or personal loan, mortgage or credit card.)
High credit card balances as compared with your credit limit, known as your credit utilization.
Like a regular credit score, personal information cannot be used to determine your credit-based insurance score, including:
Income and occupation.
Location of residence.
Although your credit score and credit-based insurance score aren’t the same, your credit score can be a good indicator of your credit-based insurance score. If you have a decent credit score, your credit-based insurance score is likely (but not always) on par.
» MORE: Get your free credit score
*FICO declined to elaborate on whether this includes credit utilization only or all debt.
What’s a ‘good’ insurance credit score?
It’s hard to say what a “good” credit-based insurance score is because each company can decide what score it defines as “good.”
For instance, one insurance company might decide a score of 750 or better unlocks the lowest car insurance rates, while another might instead require a score of 700 or better to receive its best price. And because scores come from different credit-reporting companies, those numbers won’t always be measured on the same scale.
To give you an idea of the ranges, LexisNexis offers credit-based insurance scores through credit bureau Experian from 200 to 997. Here is an example of scores and rankings from the LexisNexis website:
Below average: 501-625.
Less desirable: Under 500.
TransUnion’s website states that a “good” score is around 770 or higher.
Average car insurance rates for poor credit
Although insurers differ on what is a “poor” insurance credit score, using the example above, 625 and lower would be considered poor credit.
Average car insurance rates for a driver with poor credit are:
$2,506 per year for full coverage.
$1,078 per year for minimum coverage.
Comparatively, the average car insurance rates for a good driver with good credit are $1,080 less per year for full coverage and $471 less per year for minimum coverage.
Do all auto insurers use credit-based insurance scores?
The use of credit to determine insurance rates has come under scrutiny for several reasons. Critics say it’s unfair to price auto insurance based on credit score since it cannot predict a driver’s accident risk. There is also a general lack of awareness about the use of credit-based insurance scores to set insurance rates, and consumer advocates have pushed back on the use of credit information to set rates.
Some companies are starting to forgo credit checks. Root Insurance has pledged to remove credit scores from its pricing model by 2025, while drivers in Texas can get a no-credit-check car insurance quote from Dillo.
Still, approximately 95% of auto insurers use an insurance credit score to determine car insurance rates, according to FICO, so depending on where you live, you might have no choice. But that doesn’t mean you’re stuck with the rate you’re paying now. Shopping around for car insurance quotes can help you find lower rates, even if you have poor credit.
What company has the best rates for good drivers with poor credit?
Out of the seven largest auto insurers in the U.S., Geico, on average, has the best rates for good drivers with poor credit. (Our “good driver” profile is a 40-year-old with no moving violations and credit in the “good” tier.)
These rates are for full coverage policies, which include liability, comprehensive, collision, uninsured/underinsured motorist protection and any additional state-mandated coverage.
Here are the annual car insurance rates for good drivers with good and poor credit, averaged across all states:
*USAA is available only to active military, veterans and their families.
Car insurance rates for drivers with poor credit by state
How to build your credit and get cheaper insurance
Here are a few tips to build credit:
Pay your bills on time. Having a history of on-time payments is one of the best ways to improve credit.
Pay off your credit card debts. Do your best to pay off any credit card debt as soon as you can without going over budget.
Pay down credit card balances. There are times when you might have to use your credit card to pay for essentials. Still, try your best to keep your balances as low as possible — NerdWallet recommends staying under 10% of your total credit limit.
Limit hard credit inquiries. Hard credit pulls, like those used to determine if you qualify for a loan or credit card, may temporarily lower your credit scores. Try to leave at least six months between applications.
Find out your credit-based insurance score. Contact the company that created your score to find out why you received it. While it’s not as easy to obtain your credit-based insurance score as your other credit scores, it’s still possible. Some insurers will provide contact information to find out more about your score, especially if your car insurance rate was affected by your credit.
Get a copy of your credit report. If you’re having trouble finding your credit-based insurance score, get a copy of your credit report. The Fair Credit Reporting Act allows you to obtain a free credit report every 12 months from three consumer credit reporting companies: Experian, Equifax and TransUnion. During the pandemic, consumers are able to get a free credit report every week through April 2021. NerdWallet can provide your free TransUnion credit report; get your Experian and Equifax report at AnnualCreditReport.com.
Your report includes your:
Age of accounts.
Recent hard credit inquiries.
Medical debt and revolving credit.
Personal details such as your job and address.
You can use this data to see what factors might be affecting your credit score. Because credit-based insurance scores and credit scores use the same information in different proportions, any of these actions will affect both scores:
Ask to be added as an authorized user. If you’re close with someone who has a lightly used, established credit card account, preferably with a generous credit limit, ask them to add you as an authorized user. Being added to their card may help build your credit.
Know your rights. State laws differ in regard to using credit to set insurance rates. Contact your state’s department of insurance to find out the rules.
» MORE: Check yourself: How to review your LexisNexis report and fix errors
Other ways to save on car insurance if you have poor credit
Improving your insurance credit score will likely lower your insurance rates if you have poor credit, but there are also other ways to find savings.
Shop around. Compare car insurance rates to find the cheapest auto insurer. You may be able to find a better price than you’re paying now, even if you have poor credit. This is because every company weighs factors differently. Although one company may raise your rate by 10% for poor credit, another might raise it by 5%.
Having poor credit affects insurance rates, but shopping around won’t have an impact on your credit score because there’s no hard credit pull when you compare car insurance quotes.
Your insurance credit score is especially important when you’re getting a policy with a company for the first time. When you’re a new customer, most companies will check your score to help calculate car insurance rates. However, after your initial policy, companies vary on when they check your score, says P.J. Smith, senior director of product management at LexisNexis Risk Solutions.
Some auto insurers look at your credit-based insurance score every time you renew your policy, while others will check it only occasionally. How often your insurance credit score needs to be checked also depends on state regulations.
This means you can’t assume you’re getting the best rate just because your credit improved. Shop around to make sure you’re getting the cheapest price. Young adults, immigrants new to the country and anyone who doesn’t have a credit history can especially benefit from comparing car insurance rates.
» MORE: Getting cheap car insurance for new drivers
Usage-based insurance. If you’re a good driver, you might get cheaper car insurance rates by using usage-based insurance. Usage-based policies still use factors like location and age, but driving behavior is also considered to determine your car insurance rate. Driving habits like speeding and hard braking are generally gathered through a plug-in device or a smartphone app. Root specializes in usage-based insurance, and some traditional insurers like Progressive also offer this option.
» MORE: Comparing Drivewise by Allstate to Snapshot from Progressive
Pay-per-mile insurance. Unlike traditional insurance, premiums for this type of policy depend on how many miles you drive each month. This is usually calculated by a plug-in device or smartphone app. If you work from home or don’t drive a lot, this could cost less than traditional insurance. Some companies, like Metromile, specialize in this type of insurance, while a few large insurers, such as Nationwide, also offer a per-mile option.
Request a LexisNexis report. Your insurance credit score is only one factor used to determine your car insurance rate. Driving record and insurance history also play a big part.
Insurers get your driving and insurance history from your Comprehensive Loss Underwriting Exchange, or CLUE auto report. CLUE is a collection of data LexisNexis sells to auto insurers to help them approve clients and set premiums. You can request a full file disclosure for free on its website, which includes copies of several reports that LexisNexis compiles about you such as your CLUE auto and property reports. (Here’s an example of what your CLUE auto report might look like and some tips on how to read it.)
Personal injury protection is car insurance coverage that pays for medical expenses from car-related injuries, no matter who is at fault. While this coverage type is offered in 21 states and Washington, D.C., 13 states require all drivers to carry a minimum amount of personal injury protection, typically referred to as PIP.
What does personal injury protection cover?
PIP is meant to cover any injuries you sustain from a crash, regardless of who is at fault, and includes other benefits as well. Depending on your state, PIP could help pay for:
Medical bills and expenses that arise from a car crash.
Lost wages if you are unable to work due to injuries sustained from an accident.
Services you can no longer perform because of an accident, such as housecleaning or child care.
Funeral costs if an injury sustained from an accident leads to death.
A small death benefit as a cash payout.
When you file a PIP claim with your insurance company, you may be required to pay a deductible before you can collect the benefits. PIP generally covers the policyholder and family members in the household, passengers in the vehicle and others who are driving the car with permission. Your PIP can also cover you if you’re injured while riding in someone else’s car, or if you’re injured by a vehicle as a pedestrian or cyclist.
» MORE: What does car insurance cover?
How PIP relates to no-fault insurance
Personal injury protection is sometimes called “no-fault insurance.” The name is a reference to states with “no fault” laws, such as Florida, Michigan and New York. These laws prohibit injured drivers from suing at-fault drivers after an accident unless their injuries are severe or their medical expenses are higher than their state’s minimum requirement to sue. “No-fault” states require minimum amounts of PIP for every driver.
» MORE: What is no-fault insurance?
Personal injury protection by state
You can purchase PIP in 21 states, as well as Washington, D.C. Thirteen states require drivers to carry a minimum amount of PIP, while a few others offer it as an optional add-on to your policy. Use the map below to see if your state offers PIP, and if there is a minimum requirement.
Personal injury protection is required in 13 states
Drivers in 13 states are required to purchase a minimum amount of PIP, but this amount varies by state. Use the table below to see which states require personal injury protection, and what the minimum requirement is.
States that require PIP
Minimum coverage required
For a more detailed look at how personal injury protection works in these states, choose a state below:
PIP minimum: $15,000
What it covers: PIP will pay up to $15,000 for one person in an accident, or up to $30,000 for multiple people injured, for medical expenses and lost wages. PIP also pays up to $5,000 for funeral expenses.Florida
PIP minimum: $10,000.
What it covers: PIP will cover 80% of your medical expenses, up to the $10,000 minimum. It will also cover lost wages due to injuries from an accident, as well as pay out a death benefit of up to $5,000 per person.
In order to sue an at-fault driver, you must have suffered severe injury or death in an accident.Hawaii
PIP minimum: Hawaii requires a minimum of $10,000 in PIP.
What it covers: PIP covers medical and rehabilitative expenses that arise from an accident.
In order to sue an at-fault driver, the expenses from your injuries must exceed $5,000, or you must have suffered severe injury or death from the accident.Kansas
PIP minimum: Kansas requires PIP minimums for all of the coverage offered:
$4,500 a person for medical expenses.
$900 a month for 1 year for lost wages and disability.
$25 a day for in-home services.
$2,000 for funeral expenses.
What it covers: PIP will cover medical expenses, lost wages, disability, in-home services such as child care and housecleaning, rehabilitation and funeral expenses.
In order to sue an at-fault driver, your medical expenses must be over $2,000, or your injuries must be severe, such as a lost limb or paralysis.Massachusetts
PIP minimum: $8,000 per person in an accident.
What it covers: The first $2,000 in medical expenses will be covered by PIP coverage. Once the $2,000 threshold is met, your health insurance will become the primary payer and PIP will be the secondary payer.
In order to sue an at-fault driver, the medical expenses from your injury must be over $2,000, or you must have suffered severe injury such as a lost limb or paralysis.Michigan
PIP minimum: Michigan offers several tiers. Unlimited coverage is the default, but you also may be able to choose:
Up to $500,000 in coverage.
Up to $250,000 in coverage.
Up to $50,000 in coverage if you are enrolled in Medicaid and another member of your household has insurance that will cover injuries from a car accident.
Opting out of PIP medical coverage if you have Medicare and another member of your household has a car insurance or health insurance policy that pays for injuries from car accidents.
What it covers: Medical expenses from an accident related injury, as well as up to 3 years of lost wages.
In order to sue an at-fault driver, you must have sustained severe injuries or death from a car accident.Minnesota
PIP minimum: $20,000 for medical coverage, and $20,000 for loss of income coverage.
What it covers: Medical expenses and lost wages due to an accident, plus a $2,000 death benefit.New Jersey
PIP minimum: $15,000 per person, per accident. What it covers: Medical expenses from accident-related injuries, with the option to add on coverage for lost wages, substitute services like housecleaning and child care, funeral expenses and a death benefit payout.
In order to sue an at-fault driver, you must suffer severe injury, such as a lost limb or significant scarring, in a car accident.New York
PIP minimum: $50,000 per person (this is also the maximum amount of PIP available).
What it covers: Medical expenses caused by an accident, 80% of lost wages due to an accident-related injury, up to $25 a day for household expenses for up to 1 year after the accident and a $2,000 death benefit.
In order to sue an at-fault driver, your injuries in a car crash must be severe, such as a lost limb or paralysis.North Dakota
PIP minimum: $30,000 per person in an accident.
What it covers: Medical expenses, lost wages and funeral expenses.
In order to sue an at-fault driver, the medical expenses from your injuries must be higher than $2,500, or you must have suffered severe injury such as a lost limb.Oregon
PIP minimum: $15,000 per person in an accident.
What it covers: Medical expenses, 70% of lost wages, funeral expenses and substitute services such as child care.Pennsylvania
PIP minimum: $5,000
What it covers: Medical expenses for injuries sustained from an accident.
In order to sue an at-fault driver, the injuries you sustain in an accident must be severe, such as losing a limb or suffering paralysis.Utah
PIP minimum: $3,000 per person.
What it covers: Medical expenses for accident-related injuries, including surgeries, X-rays, dental services, rehabilitation services and hospital services. It also covers up to 85% of lost wages, or $250 a week (whichever is less), $20 a day for up to one year for household services, funeral expenses and a death payout of $3,000.
In order to sue an at-fault driver, the medical expenses from your injury must be over $3,000, or the injuries you suffered must be severe, such as a lost limb or paralysis.
PIP is optional or can be waived in 8 states, plus Washington, D.C.
Eight states plus Washington, D.C., offer personal injury protection as an optional add-on or allow drivers to waive it in writing. Use the table below to see how these states handle PIP coverage.
After a serious traffic violation, you may face a car insurance requirement you haven’t encountered before. To keep your driver’s license, or get it back after it’s been revoked, you may need an SR-22 form from your auto insurer. (There’s not a special policy called “SR-22 insurance.”)
Having to file an SR-22 is no one’s idea of fun. You’ll pay higher car insurance premiums than a driver with a clean record and you’ll be limited in your choice of insurers. But shopping around for the cheapest rates can help. Here’s what you need to know.
What is an SR-22?
Even though it might be called “SR-22 insurance,” an SR-22 form isn’t actually an auto insurance policy — it’s an official document to prove you’ve bought the minimum liability insurance required in your state. The SR-22 form may also be called a certificate of financial responsibility.
With an SR-22, insurance companies assure your state’s motor vehicle or insurance department that you’ll maintain coverage for a certain period of time. If you don’t, the insurer will alert your state, and your driver’s license could be suspended or revoked.
Who needs an SR-22?
An SR-22 allows you to keep or reinstate your driving privileges after serious or repeated offenses.
You might be required to have an SR-22 if:
You’ve been convicted of DUI, DWI or another serious moving violation.
You’ve caused an accident while driving without insurance.
You’ve gotten too many traffic tickets in a short time, such as three or more speeding tickets within six months.
You didn’t pay court-ordered child support.
Your driver’s license has been suspended or revoked.
For certain convictions in Florida and Virginia, you may be ordered to file a similar form called an FR-44, which requires a higher level of liability coverage than the state’s minimum.
Not all states require an SR-22 or FR-44. If you need one, you’ll find out from your state department of motor vehicles or traffic court.
» MORE: SR-22 in California: Auto insurance after a setback
How to get an SR-22
The procedure for getting an SR-22 form can vary by state, but here’s how it typically unfolds.
When you’re notified you need an SR-22, start by contacting your auto insurance company. Some insurers don’t offer this service, so you may need to shop for a company that does.
» MORE: Compare car insurance rates
If you don’t already have auto insurance, you’ll probably need to buy a policy in order to get your driving privileges restored. And the insurer may require you to pay the entire premium upfront — either six or 12 months’ worth.
When your coverage is in place, the insurance company will file the SR-22 form with your state’s traffic authorities.
Car insurance companies that file SR-22s
Insurers that specialize in coverage for high-risk drivers typically offer SR-22 filing. They include:
Many of the largest auto insurance companies also offer SR-22 forms, including:
*USAA is available only to active military, veterans and their families.
» MORE: The best high-risk auto insurance companies
How much an SR-22 costs
Filing an SR-22 with your state typically costs about $25, but that one-time fee isn’t the only extra expense you may face. When you need an SR-22, insurance quotes may be higher than normal.
How much higher? That depends on where you live and what violation resulted in your SR-22. Insurance quotes will also differ depending on what car insurance company you choose. To get the best rate for you, it’s important to compare rates from multiple insurers.
» MORE: Car insurance quotes: What you need to know
Why it’s smart to shop around
Looking for a cheap SR-22? Insurance companies that gave you a low rate before your SR-22 requirement may not give you the best rate afterward, and no insurer is the cheapest everywhere. Location matters.
As an example, consider a driver with a recent DUI, a violation that might result in an SR-22 requirement. NerdWallet’s 2020 rate analysis found that out of companies offering an SR-22, insurance rates on average were cheapest from American Family for 40-year-old drivers with a recent DUI. However, our data also shows that 40-year-old drivers with a DUI would receive better rates on average from Safeco than American Family if they lived in Idaho.
» MORE: Find the best cheap car insurance after a DUI
So, after a DUI or any violation that results in an SR-22 requirement, it’s wise to shop around and find the best auto insurance rate for you. NerdWallet’s car insurance comparison tool can help.
You might find that your current provider cancels your coverage or declines to renew your policy in light of your SR-22. Insurance companies that specialize in covering high-risk drivers may also deny you coverage. In that case, you can turn to your state’s high-risk insurance pool. To start, find your state in the directory of the Automobile Insurance Plan Service Office.
SR-22 when you don’t own a car
If you don’t own a car, you may still need an SR-22 or FR-44 filed on your behalf to get your driver’s license reinstated. Some insurers will file them for you if you buy non-owner car insurance.
» MORE: Non-owner car insurance: Where to buy and what it covers
This insurance will cover any damage you cause while driving a vehicle you don’t own, such as a car you’ve borrowed or rented.
Non-owner insurance can also help you avoid a lapse in coverage. Drivers with a gap in coverage can face higher premiums because insurers view them as a risk. If you don’t have a break in coverage, you’ll qualify for better rates when your SR-22 requirement is over.
After your SR-22 ends
In most states, an SR-22 requirement lasts three years. If your policy lapses while you have an SR-22, your insurer is required to alert the state and your license will be suspended.
When your requirement ends, the SR-22 doesn’t automatically fall off your insurance policy. Make sure to let your insurance company know you no longer need it.
This is also a good time to shop again for the cheapest insurance policy for you. Rates typically remain high for three to five years after you’ve caused an accident or had a moving violation. If you shop around just after the three- and five-year marks, you may find lower premiums.
Time is no friend to the car owner. Unlike many assets, a car’s value generally decreases over time. This is called depreciation.
While it’s an expensive part of the total cost of owning a car, you only feel the effect when you sell or trade it in. Here’s a primer on what depreciation means for you as a car owner and how you can manage it.
Depreciation begins as soon as you drive off the lot.
Your car’s value decreases around 20% to 30% by the end of the first year. From years two to six, depreciation ranges from 15% to 18% per year, according to recent data from Black Book, which tracks used-car pricing. As a rule of thumb, in five years, cars lose 60% or more of their initial value.
However, not all vehicles depreciate at the same rate, meaning certain makes or models hold their value better than others. And depreciation rates can also change over time.
For instance, when gas prices spike, the value of large SUVs or pickup trucks may plummet, because fewer buyers are willing to pay for a gas guzzler. Or, when returned lease vehicles flood the market, depreciation rates on those models can accelerate because there’s such a large supply of them.
In fact, leasing offers another helpful way to think about depreciation. When you lease a car, the price is based on the portion of the car’s value that you’ll use, which is essentially the depreciation.
The residual value is what the car will be worth when you’ve finished your lease term. After three years, cars generally have residual values of around 40% to 60% of their original price (though the market value may be higher).
Strategies to manage depreciation
This decline in the value of vehicles may seem dramatic, but there are strategies to reduce or manage depreciation on the cars you drive.
A brand-new car will depreciate the most because of the steep first-year drop. Buying a car that is just one year old avoids this first hit from depreciation and saves you a significant amount of money on a nearly new car. And, of course, waiting past the three-year mark could save the owner around half of the car’s original price.
» MORE: Compare the costs: Buying a new car vs. used
RESEARCHING RESALE VALUE
Savvy new-car shoppers can find exceptions to the depreciation curve. For instance, the Chevrolet Colorado lost only 7% of value in the first year in 2016, according to an analysis by iSeeCars, which aggregates used-car listings. Or used-car shoppers can look for steep discounts, like the Volvo S60, which had a 34.4% first-year depreciation drop in 2016, shaving off around $14,000 in just one year.
You can use tools like Kelley Blue Book’s five-year cost to own or Edmunds.com’s true cost to own calculators to research how much specific models typically depreciate.
You don’t have to buy a car to drive one. When you lease, you basically pay for the car’s depreciation, plus tax and interest. At the end of the lease term, you can simply turn the car in — you don’t have to worry about selling it at a loss if your vehicle’s value has unexpectedly plummeted.
On the flip side, because the purchase price at the end of the lease is guaranteed at the beginning of the contract, you could also get lucky. If at the end of the lease, the car’s resale value is worth more than its residual value in your leasing contract, you can decide to buy it and keep it or resell it for a profit.
But leasing may not be your preferred option if you like the stability of owning and don’t want to return a car every few years. Consider whether leasing makes sense for you, and use NerdWallet’s lease calculator to help you estimate payments and negotiate confidently.
Creative add-ons — like noisy mufflers for race enthusiasts or black aftermarket rims — may be fun, but they can reduce your car’s value. Customization shrinks the pool of prospective buyers to those with your exact tastes. Furthermore, potential buyers might worry about whether the modifications were correctly performed or if they could signal potential mechanical issues.
Your car’s color can also affect the resale value. Flashy yellows, reds and purples may show off your personality and stand out on the road, but are harder to resell. If you anticipate selling or trading in later, stick with colors that are more widely popular.
MAINTAINING YOUR CAR — AND KEEPING THE RECORDS
Regularly servicing your car and keeping all records can prevent your car from depreciating as quickly as a haphazardly maintained car of the same model and year. These two steps move you to the head of the class when it’s time to sell. They demonstrate to prospective buyers that you were a responsible owner, increasing your car’s resale value.
There are two main ways to sell your car: trading it in to a dealership, or selling it to a private buyer. If you trade in, you’ll be offered a below-market price, since dealers take on the costs of reconditioning and then reselling your car. There are steps you can take to maximize the value of your trade-in, but you’ll often get the best price by selling your car privately. If you don’t mind the extra work and time it takes to prep your car and meet with buyers, this can take a significant bite out of your depreciation hit.
Should you ever buy a new car?
Despite that 20% to 30% drop in a car’s value in the first year, there are still reasons to consider buying new.
As opposed to buying used, it’s often easier to negotiate the initial purchase price, and new car loans tend to get the best rates. Plus, to get new models out the door, automakers may provide car-buying incentives that can significantly cut the sticker price. Finally, you don’t have to worry about a new car’s condition, and new cars come with warranties, making them potentially easier and cheaper to maintain.
And ultimately, if you plan to drive your car until the wheels fall off, you’ll have used all of the car’s value, and depreciation won’t be as much of an issue.