How Region Affects Car Insurance Rates

By Desiree Baughman
Desiree maintains insurance licensure in 46 states, and by combining years of experience as a writer and insurance professional, she delivers information consumers can easily relate to and understand. A graduate of Sweet Briar College with a diverse writing portfolio, she regularly serves as an expert source and commentator for respected outlets like CBS Money, Bankrate, and Ragan.com.

How Region Affects Car Insurance Rates

Location, location, location. Typically used when referring to real estate, this phrase also applies to car insurance. Although there are a variety of factors that affect your rates, like your driving record, the type of car you have, and how much insurance you purchase, your zip code may play more of a role in determining premiums than you think.

Why Does Location Affect Your Car Insurance Rates?

Why does your insurance company care which state, town, or even neighborhood you live in? The answer is simple. The insurance industry operates on a risk-based business model. If you live in a state that is prone to severe weather such as snow storms, driving is relatively more dangerous than in a sunnier locale. More claims are filed and more payments are made due to weather-related crashes. Those extra costs would eat into industry profits if carriers did not charge higher rates to drivers in riskier areas.

What Makes a Location Risky?

Just because you leave your doors unlocked at night doesn’t necessarily mean you live in a risk-free zone. Crime is just one aspect that insurance companies examine when determining how risky an area is. Others include:

  • Density:In a city of 1 million or more people, the chances of getting into a car accident are significantly higher than in a city of 200,000. As a result, big city dwellers will pay much more for car insurance than those residing in more rural areas. But look on the bright side: If you have a dodgy driving record, you could save lots of money by using public transportation.
  • Frequency of Loss: Some cities are more prone to car accidents than others, and there is a direct correlation here with the density factor. For example, drivers on the congested streets of D.C. are twice as likely to crash than the national average.
  • Safety Services: If you’re in an accident, a quick response by emergency personnel can mean the difference between life and death. Police, fire department, and ambulance response times are examined by insurance companies in addition to factors such as road design and number of intersections, traffic law enforcement rates, and the way roads are maintained in inclement weather. A well-run city is a safer environment for drivers, which can lead to lower rates.
  • Theft & Vandalism Rates: If you live in a neighborhood with a high rate of car theft or property damage, your insurance rates will be higher.
  • Weather: Conditions like harsh winters, earthquakes, flooding, tornadoes, and hurricanes are an insurer’s worst nightmares. Some areas are more prone to severe weather, and your insurer sees a forecast of rising rates if you live in one.
  • Litigation Climate: This climate has nothing to do with the weather. If you live in an area where people frequently sue, the financial risks of an accident are naturally higher. Your insurance company may have to fork over legal fees and court costs in addition to paying for property damage and medical bills in the event of a loss.

The number of uninsured or underinsured drivers on local roads can also impact your premiums, especially in areas of low population density. It’s estimated that one in seven drivers are uninsured, with the national average at 13.8 percent, which actually seems pretty good compared to the percentage of uninsured drivers in the following five states:

1. Mississippi 26%: Population 2,991,207

2. Alabama 25%: Population 4,833,722

3. California 25% : Population 38,332,521

4. New Mexico 24% : Population 2,085,287

5. Arizona 22% : Population 6,626,624

What Are the Riskiest Locations in the U.S.?

If you live in Michigan, and more specifically Detroit, you’re paying the highest auto insurance rates in the entire country. High crime rates, poor roads, lack of city resources and a no-fault insurance system drive up costs and therefore prices in the Motor City, where annual premiums average over $10,000. That’s ten times the amount that drivers in Winston-Salem, North Carolina–which boasts the lowest annual premiums–pay for car insurance. Though Detroit is truly in a class of its own, nine other cities round out the list of most expensive auto insurance premiums:

City: Average Annual Premium

1. Detroit, Michigan: $10,723

2. New Orleans, Louisiana: $4,310

3. Grand Rapids, Michigan: $4,042

4. Newark, New Jersey: $3,525

5. Baton Rouge, Louisiana: $3,364

6. Hialeah, Florida: $3,272

7. Jersey City, New Jersey: $3,267

8. Louisville, Kentucky: $3,256

9. Miami, Florida: $3,169

10. Philadelphia, Pennsylvania: $2,931

The Cheapest Places to Insure Your Car

We hope that nobody chooses where to live based on car insurance rates, but it doesn’t hurt to catch a break for settling somewhere safe. Here are the states with the cheapest annual car insurance rates:

1. Ohio: $926

2. Maine: $964

3. New Hampshire: $983

4. Idaho: $1,053

5. Iowa: $1,053

6. North Carolina: $1,060

7. Wisconsin: $1,087

8. Virginia: $1,114

9. Vermont: $1,149

10: New York: $1,173

There Are Ways to Save Money on Car Insurance Regardless of Where You Live

Even if you live in a high crime area or a crazy weather zone, there are ways to shave dollars off your premium without moving your entire life. If you live in a city, parking your vehicle in a secure garage could earn you a discount. You could also get one for installing a monitor in your car that tracks your driving habits. For example, if your monitor shows the insurance company you only use your car twice a week, you could get a lower rate than someone who commutes for two hours a day. Monitored drivers are also rewarded for things like not slamming on the brakes.

Insuring multiple vehicles with the same insurer or bundling auto and other types of policies are other ways to earn significant discounts. And of course, maintaining a clean driving record is a great way to keep your rates down. But if you feel that you’re still overpaying, the best option is to shop around. Rates can vary by thousands of dollars depending on the carrier and the coverage, so it’s probably worth your time to do a little homework.