Why Do Car Insurance Rates Differ by State?

Whether you just moved to a new state or are considering a move across state lines, there's a good chance your car insurance rates are going to change.

While this is not the case in every situation , auto insurance rates do tend to vary widely between states and sometimes even between cities in the same state.

While you may think this is a greedy ploy for car insurance companies to take advantage of drivers, it may surprise you to learn that this is generally not the case. There are several factors that determine how much drivers will pay for their car insurance rates in each state.

Differing State Laws

The laws in each state are different, which often means that insurance rates will be as well.

Most states have their own requirements concerning:

  • Types of mandatory coverage.
  • Minimum limits for auto insurance.

Additionally, if you are moving to a state with a no-fault insurance system, you will almost certainly pay more in premiums.

While many states do not charge a specific tax for auto insurance policies, they may tack on a variety of fees and surcharges that can add extra dollars to your premium.

Accident and Crime Rates

Local accident AND crime rates are big factors in determining the cost of your auto insurance.

If you're living in or moving to a state that is more densely populated, such as New York, it is likely you will have to pay a higher premium because of the increased risk of getting involved in an accident. Contrastingly, people living in West Virginia tend to enjoy cheap car insurance because the state is so sparsely populated that there is a relatively low risk of accidents.

The same goes for property crime rates. If your new home is in a state with a higher-than-average rate of theft or vandalism, your rates may creep up to help your insurance company cover the additional risk of insuring your vehicle.

The Habits of Other Drivers

Sadly, how other people tend to drive in your state can have a distinct impact on your own auto insurance rates.

FOR EXAMPLE, if you live in an area with a large number of uninsured drivers there's a good chance you will see a spike in your insurance rates. Car insurance companies must account for the added risk associated with so many uninsured motorists.

The likelihood of lawsuits is another element that contributes to the cost of your auto insurance. Third-party claims can be a long, expensive process, and if drivers in your state are particularly prone to filing lawsuits, this can be reflected in your premiums.

Who Has the Highest Rates?

Michigan is presently the most expensive state for car insurance. On average, drivers here can expect to pay over $2,500 in premiums, which is roughly double the national average. This is largely due to the fact that Michigan is one of the only no-fault states that requires drivers to purchase unlimited, lifetime medical benefits. This is extremely costly, and the added expense contributes to the large percentage of uninsured drivers in the state.

Other places with some of the highest overall insurance rates include:

  • Montana.
  • Louisiana.
  • Oklahoma.
  • Washington D.C.

Who Has the Lowest Rates?

Luckily, there are plenty of states that have relatively cheap car insurance premiums compared to the national average.

Maine is almost always at the top of this list with an average cost of $889 in 2016 and similarly low costs in years prior. This modest rate results from the fact that the state has vast stretches of sparsely populated areas and few uninsured motorists.

Other states that frequently boast cheap car insurance rates are:

  • Iowa.
  • Wisconsin.
  • Idaho.
  • North Carolina,
  • Arizona.
  • New Hampshire.
  • Vermont.

Whether you have just moved or are considering living in a different state, be sure to do your research. Keep in mind that just because a certain insurance company gives you the best car insurance rates in your current location doesn't mean that will be the case if you move to a new state.