Where premiums are highest and lowest, and why
If you’ve lived in different
states or regions of the country throughout your life, you may have noticed something about your cost of living — the price you pay for your auto insurance varies drastically by location. These differences are not arbitrary, however; several factors go into determining insurance rates:
Legal environment – “Next time you’re in your car driving down the road, take a look at the billboards. Do you see a lot of ads for what are known as ‘ambulance chasers?’” queries Gigi Douban of Marketplace.org.
Robert Hoyt, a risk management and insurance professor at the University of Georgia, explains that rates are higher in areas where residents tend to sue each other often, thus creating an ideal environment for lawyers who specialize in cases seeking damages for personal injury. Insurance companies track litigation rates, how often juries award for damages and other factors when setting insurance rates in any given area.
State laws – Varying insurance regulations also contribute to the difference. Hoyt says that in his experience, states in which drivers have the highest auto insurance costs are the no-fault states, meaning the insurance company covers your injuries in those states.
Population density – People in urban areas tend to pay more for car insurance. “The more cars, the more accidents that happen,” explains Laura Adams, senior analyst with InsuranceQuotes.
Other sociopolitical factors – The level of competition among insurance providers is another factor that is taken into consideration; think of it as supply and demand.
Also, Forbes reports that rates are costlier in states that have a higher-than-average percentage of uninsured and underinsured motorists (largely because of economic reasons) who cause crashes for which they aren’t covered and can’t pay. One other way prices can vary by state is if you are in an area prone to storms and thus storm damage. Rates increase if there was severe weather the previous year that produced more claims than normal the year before that.
Put into practice
A 2015 report from InsuranceQuotes shows that drivers from North Carolina, Wisconsin and Maine pay the least for auto insurance. North Carolina’s rates run 41 percent less than the national average, while Michigan’s rates are more than double that average.
According to Insure.com, Falmouth, Maine, has been known to boast the lowest premiums in the country, a fact largely accredited to relatively low traffic density, active competition among carriers, low crime rates and the absence of recent natural disasters.
“Many of these problems are outside the control of drivers,” says Amy Danise, editorial director of Insure.com. “But even if you live in an expensive state, you can hold down your insurance costs by keeping your driving record as clean as possible and selecting a car that is cheap to insure.”
Whether it’s automotive or anything else, stop by today to see if we have any insurance products that can be of assistance to you.
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