Do State Auto Insurance Rates Differ?

While there are many personal factors about a driver that affect the cost of his insurance, a big one that all companies consider is where he lives. Auto insurance rates vary from state to state, and even from region to region.

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There are many reasons insurance costs differ between states. Some of it has to do with laws in that state, while other reasons have to do with the population and make-up of it. Calculating insurance premiums is a complex process with many variables.

Insurance Laws Vary by State

One of the reasons that rates are different across the country is that the laws which govern auto insurance are made at the state level. Thus each state sets its own requirements for the amount of insurance you must have to drive legally.

A couple of states, New Hampshire and Wisconsin, don’t require you to buy auto insurance, but only in very special circumstances.

In these states, you are still required to pay for any damages you cause with your vehicle. If you have the financial means, though, you can basically self-insure by buying a special bond which can be used to pay for those damages.

However, even in these two states, the vast majority of drivers buy car insurance since they can’t afford this alternative. Even these two states set a minimum requirement for the amount you have to buy of certain types of coverage, if you have outside insurance.

Liability Limits Set by States

All states set a minimum requirement for the levels of liability insurance all drivers must carry. This is commonly referred to by three numbers which represent how many thousands of dollars of coverage you have. For example, in Wisconsin, if you buy insurance you have to have at least 25/50/10 liability insurance.

The first number represents $25,000 of medical coverage per person in the car you hit that the policy will pay. There is a limit of $50,000 per accident, which is what the second number means. The third number indicates that the policy will pay up to $10,000 in property damage, usually to repair or replace the other driver’s vehicle.

In addition to liability, certain states require you to carry other coverages as well. Some require that you carry uninsured/underinsured motorist coverage. This policy will pay for your car repairs if the person who causes the accident doesn’t have any insurance, doesn’t carry enough, or hits and runs.

Since about one in seven drivers are uninsured, according to USA Today, some states have made uninsured/underinsured insurance mandatory to protect their citizens.

Some states, especially no-fault states, also require you to carry personal injury protection, or PIP. This pays for your medical expenses no matter who caused the accident. Clearly, the more insurance you are required to have to drive legally, the more expensive it is to insure drivers in that state.

Population and Geography Differences

Another factor about your state which can help determine your costs is how many cars and people share the state with you. The more densely populated a state is, the higher the possibility you will be involved in an accident. This means that all residents are considered higher risk in a state like New Jersey with many residents than in places like Wyoming that are much less densely peopled.

Where you live in the state will also have an effect. For example if you live in the Dallas/Fort worth area of Texas, one of the largest metropolitan areas in the country, with a high accident rate, you will pay more than if you drive the same car but lived in sparsely populated, rural west Texas.

Insurance companies have statistics that show how each state, and each county within the state, rates as far as the number of accidents and other claims. If you live in an area where hail storms are common, you’ll probably pay a bit more due to the higher number of claims stemming from them.

Infrastructure

Some states spend more than others to keep their roads, signs, and other parts of the road system up to par. Since better maintained roads with adequate signage results in fewer accidents, these states usually enjoy lower insurance rates than other states.

The structure of the court system will also have a bearing on the costs to insure drivers in that state. In some states, there is a higher tendency to take the issue of insurance claims to court. This results in much higher costs for the insurance company in lawyer fees, court fees, etc. Thus these states are also more expensive to purchase insurance in.

Personal Factors that Affect Insurance

In addition to the state in which you live, there are many factors about you, the driver, which can cause your insurance to be vastly different from your neighbor’s.

It should be obvious that those with poor driving records will pay more in insurance, as they have shown a pattern of being in multiple accidents and/or receiving multiple tickets. Sometimes, even just one ticket or accident can cause a pretty substantial jump in insurance costs.

Insurance companies also look at the ages and genders of the drivers on the policy.

Young adult drivers, especially young men, pay higher premiums as they are in the group with the highest risk to have an accident. The driver’s occupation can also affect the premium, as can the amount of your commute.

Even something as simple as a garage can affect your payments. If you can park your car in the garage at night instead of the street, this could lower your costs.

Your Car Affects Insurance Costs

It’s not just you that insurance companies look at when deciding how much to charge. They also take the cars you drive into consideration.

If you drive new and/or expensive cars, expect to pay more. Not only might you be paying for comprehensive and collision coverage, but these cars are going to be expensive to replace it they are totaled. The parts are often more expensive, so even repairing them can be costly.

Sports cars and high-performance cars are perhaps the most expensive vehicles to insure for anyone, but especially young men. Since these cars are built for speed, they represent a higher risk for tickets and accidents to the insurance companies.

And insurance companies consider almost any two door car a sports car for their purposes. So the two door version of a car can be up to twice as expensive to insure as the sedan version.

Older cars are often much less expensive to insure for a couple of reasons. If the value has decreased down to just a few thousand dollars, may people opt to forgo the comprehensive and collision coverage. The cars just aren’t worth it.

Insurance companies also take a look at how the cars are equipped, especially when it comes to safety and preventing theft.

Medical expenses stemming from injuries incurred during a traffic accident are by far the most expensive part of insurance claims.

Thus insurers love vehicles thatdecrease these injuries with advanced safety features.

If you’re looking for an explanation of what these features are, Consumer Reports has put together a great list that explains what to look for and how they work.  Or you can check out the safety ratings on various vehicles issued by the Insurance Institute for Highway Safety.

Ways to Save Money (Besides Moving)

No matter whether you live in a large city with hundreds of traffic accidents each year, or in a small rural area, you can save money on your auto insurance.

First of all, ask your insurance company to go over the available discounts with you to make sure you are getting all of them for which you are eligible. This might be a safe driver discount if you’ve gone longer than three to five years without an accident.

Also see if your auto insurance company also insures homes. If they do, ask for a quote for your home. If you get both policies from the same company, you’ll usually get a discount on both policies.

Many companies will give you a great discount if you can pay your entire premium upfront rather than monthly.

In fact, some companies even charge you an installment fee each month if you pay it that way. However, if you agree to set up automatic payments, which allow the company to automatically withdraw the amount each month, they might give a discount for this, offsetting the cost of paying it out monthly.

Take a look at the deductible you have set for your comprehensive and collision coverage. The deductible is the amount of the repair you agree to pay first before the insurance company takes care of the rest.

Typical amounts are $250, $500, and $1000. If you can raise your deductible to $1000, you can save as much as 40%.

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