It’s been well established that a motorist’s address is an essential actuarial element used to determine how much he or she will pay for auto insurance (along with age, gender, marital status, driving record, and the car driven). Generally, those living in crowded urban areas pay more than residents of sleepier suburban and rural regions, due to higher population density, crime rates, and other actuarial elements. But few policy holders realize that, with all else being equal, the rates insurance companies charge can vary greatly from one state to another.
Motorists in Michigan pay the steepest premiums in the nation at an average $2,395 per year, according to the annual per-state analysis of car insurance costs conducted by Insure.com. Meanwhile, residents of Maine enjoy the lowest average rates at just $864 a year. So why do those living in the Wolverine State pay nearly three times as much for the same coverage than those in the Pine Tree State?
That’s because, despite the barrage of national TV spots placed by auto insurance companies, the business is conducted largely on a state-by-state basis. Providers must be licensed by each state in which they do business and adhere to specific laws and regulations, some of which may be more or less “friendly” to carriers than consumers. Those living in heavily populated states generally pay more for coverage, as do those residing in states where inclement weather – especially hail storms, tornadoes, and hurricanes – lead to a greater claims frequency. And rates are also affected by whether local court decisions regarding claim-related judgments tend to favor plaintiffs or the insurance companies.
High And Why?
According to Insure.com, Michigan tops the nation largely because of its so-called no-fault auto insurance system. As with other no-fault states, Michigan requires auto owners to carry personal injury protection (PIP) coverage that pays for medical expenses of the policyholder, family members, and uninsured passengers if they’re injured in a collision. However, unlike other states that have similar provisions, Michigan does not set limits on PIP coverage, which tends to result in higher average per-policy payouts. Increased insurance fraud and a greater-than-average number of uninsured drivers on the road also help keep premiums in Michigan at the top of the charts.
At the other end of the list, motorists in bucolic Maine endure less traffic and population density, and enjoy generally non-violent weather conditions, while insurance companies have to assume fewer uninsured drivers, and do business in a market that’s less heavily regulated than it is in other states.
What about those who live within the aforementioned densely populated and crime-ridden metropolitan areas? According to the web site CarInsurance.com, those living in Detroit, Michigan’s 48227 zip code pay 199% more than the state average, the highest such surcharge in the nation. Other zip codes in which premiums are the highest over their respective state averages include Brooklyn, New York 11212 at +152%, Philadelphia, PA 19132 at +110%, Coral Gables, FL 33135 at +82%, and New Orleans, LA 19132 at +71%.
Shop Or Move?
While nobody would recommend picking up stakes and moving to another state just to save money on car insurance, if you live within proximity of a state line, you might want to find out how much more or less they’re paying, on average, across the border. (Insure.com features an interactive map that shows the average premiums in all 50 states and the District of Columbia.) If you’re living in Wyoming, for example, you could save an average $596 a year by moving to Idaho. Leaving Connecticut for nearby Vermont would slash an average $948 from one’s annual premiums.
No matter where you live, it always pays to shop around among major carriers to see which one can give you the cheapest rates, based on how they treat various actuarial factors to determine rates within a given state. For example, WalletHob.com found that major carriers treat poor credit scores differently when it comes to setting car insurance rates. Of the top five auto insurers, GEICO was found to penalize its policyholders the least for having bad credit at an average 29% rate increase, while Farmers Insurance dunned its credit-poor customers an average 50% more for coverage.
Here’s Insure.com’s list of the 10 costliest and cheapest states for car insurance:
- Michigan, $2,395, 82% higher than average
- Louisiana, $1,921, 46% higher
- Connecticut, $1,897, 44% higher
- Rhode Island, $1,848, 40% higher
- Florida, $1,840, 40% higher
- District of Columbia, $1,840; 29% higher
- California, $1,673; 27% higher
- Wyoming, $1,538; 17% higher
- Delaware, $1,526; 16% higher
- Texas, $1,506; 14% higher
National Average $1,076
- Utah, $1,068; 19% less than average
- South Dakota, $1,058; 20% less
- Virginia, $1,040; 21% less
- Indiana, $1,020; 23% less
- Iowa, $1,017; 23% less
- North Carolina, $1,010, 23% less
- Vermont, $948, 28% less
- Idaho, $942, 29% less
- Ohio, $919, 30% less
- Maine, $864, 34% less