How location affects car insurance premiums

Your city, address and ZIP code have a big impact on car insurance.

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Your car insurance premiums are a combination of many different factors. Location is one of the most significant factors. The state you live in, whether you’re in a rural or an urban area, what your house is like and even your specific address can all raise or lower your car insurance premiums.

How your city and state impact the cost of car insurance

The state you live in has a significant impact on the price of your car insurance. For example, car insurance is most expensive in Louisiana and Oklahoma, while Maine tends to have the lowest prices overall.

It’s probably not worth moving to another state for lower car insurance premiums, but it is worth being aware of these factors as they are also applied on a regional and local level.

  • State legislation. Liability insurance and minimum requirements are managed on the state level, which means costs can vary widely.
  • Population. A higher population means more cars on the road, more chance of having an accident and higher premiums.
  • Number of claims. The more claims originating from your state, the higher you can expect your premiums to be.
  • Risk. States with higher occurrences of car theft, vandalism or extreme weather conditions pose a greater threat and therefore may have higher premiums. And rural areas may have higher risks of animal collisions.
  • Competition. Areas with more competing insurance companies might have lower prices.

Why car insurance varies by state

There ae a few main factors that affect how your car insurance varies by state, a few of those are:

  • States’s minimum requirement. They are the biggest factor in car insurance rates.
  • Liability. only is the cheapest form of insurance, and all states set certain minimum levels of insurance.
  • Underinsured motorist coverage. some states also require you to add it, which adds to your premiums. And still others require PIP insurance, or personal injury protection insurance.

Take Michigan as an example. Michigan has some of the highest car insurance rates. Michigan drivers are required to get no fault car insurance that covers all injuries and damages in an accident. Michigan residents receive unlimited protection for personal injuries and up to three years of income loss after an accident. So while drivers and passengers receive extra benefits after an accident, drivers have to pay extra for that privilege.

Car insurance rates by state

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How your neighborhood affects car insurance prices

Urban areas are more densely populated than rural ones, with busier roads, more car accidents overall and a generally higher likelihood of making claims of any kind. This increases premiums in cities.

However, living in rural areas means you typically need to drive longer distances on every commute, the roads can be in worse condition and you may be more likely to lose a car to bushfires or other hazards than someone living in the city.

Overall, you’re more likely to get lower premiums in rural areas. However, it all depends on where exactly you live.

Premium differences based on your address and home

Your address is used to apply very specific risk data based on location, and risk factors vary between neighborhoods the same way they can vary between states. This is based on the odds of making a claim and might be affected by countless factors such as how narrow or wide your road is, whether it turns on to an unusually dangerous intersection and many others.

  • Where you park. You can pay less for car insurance if you park in an enclosed garage or carport overnight, instead of on the street. Therefore, addresses without a garage have higher car insurance prices.
  • Weather. Rain, snow, hail, flooding and other bad weather can cause car accidents, so areas with frequent or extreme weather conditions can have higher insurance rates.
  • Crime. If your comprehensive car insurance policy includes coverage for theft, the crime rate in your neighborhood will likely impact your premiums.
  • Population density. The more crowded your area and the more cars on the road, the higher the car insurance.
  • Road maintenance. Poor road conditions are responsible for many accidents, so having better maintained roads in your area can lower premiums.

How to get cheap insurance no matter where you live

The golden rule of car insurance prices is that your odds of making a claim determine your premiums. Fortunately, you don’t need to move to save on car insurance.

If you live in a high-risk area, usage-based car insurance is your best bet for cheap rates. You can show your insurer you’re a safe driver at low risk for accidents or claims with an app that measures how you drive. This lets you take perceived risk out of the equation and get a rate based on your actual driving habits.

Safe, low-mileage drivers could save 50% or more with usage-based insurance.

Bottom line

There are many other factors which affect car insurance prices besides location. It can be worth looking over them for other ways to cut your car insurance premiums. Once you’ve done that, getting low prices is largely about comparing policies side by side.

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