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Does location affect car insurance premiums?

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How your address impacts your car insurance rates

Your car insurance premiums are a combination of many different factors. As a general rule, if it affects the odds of you making a claim, it will impact your premiums, and the more of a difference it makes, the larger the price difference.

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.

Compare factors that influence your insurance and how your location is factored into the cost of car insurance, starting with price differences between states and going right down to your specific ZIP code and address.

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How your state impacts 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.

  • State legislation. Liability insurance and minimum requirements are managed on the state level, which means costs can vary widely.
  • Competition. Areas with more competing insurance companies might have lower prices.
  • 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 theft, vandalism, or extreme weather conditions pose a greater threat and therefore may have higher premiums.

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.

How your region 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.

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Premium differences based on your address and home

Your address is used to apply very specific loadings 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 and other bad weather can cause car accidents, so areas with frequent or more extreme poor weather can have higher prices.
  • 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 prices.
  • 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 reduce location-dependent loadings. Instead, try finding a policy that matches your situation and needs.

Get cheap car insurance

There are three main levels of car insurance coverage to choose from. The more at-risk your area is for certain hazards, the more important it is to get covered against it, but keep in mind that it will typically cost more.

  • Comprehensive. Comprehensive car insurance is the highest level of coverage available. It is generally the only policy that includes effective coverage for weather damage, which means it may be disproportionately more expensive, but also important in locations that are prone to extreme weather. Parking in a garage or under cover can help lower the cost of comprehensive coverage.
  • Collision coverage. Unlike third-party-only policies, locations at higher risk of car theft will attract higher prices. Collision coverage is more affordable but doesn’t offer as much coverage as comprehensive. Car security systems, such as immobilizers, alarms or VIN etching, can help you keep costs down.
  • Liability only. Liability coverage is the most affordable type of policy. However, this policy generally comes with little or no coverage for damage to your own car. If you live in a high-risk, high-premium location, then this policy type may be disproportionately more expensive, yet still missing the type of coverage you need.
  • Usage based. Show your insurer you’re a safe driver at low risk for accidents or claims with an app that measures how you drive. Take perceived risk out of the equation and get a rate based on your actual driving habits. Safe, low-mileage drivers could save 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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Andrew Munro

Andrew writes for finder.com, comparing products, writing guides and looking for new ways to help people make smart decisions. He's a fan of insurance, business news and cryptocurrency.

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