The Cheapest and Most Expensive Car Insurance States

Why Are There Huge Differences in Auto Insurance Rates?

The Cheapest and Most Expensive Car Insurance States
May 28, 2014

“Location, location and location.” This is the answer real estate agents usually give when asked what are the three most important factors in the price of a home or piece of property. It could also be the answer to the question: What are the most important factors in determining how much you’ll pay for automobile insurance?

There are many different variables that go into the price of car insurance, but the state you live in is an increasingly important one. The most recent study of car insurance prices revealed that average car insurance premiums in the most expensive state are more than double the premiums in the least expensive state.

The Top (and Bottom) Ten States

According to Insure.com’s 2014 study of auto insurance premiums, residents of Michigan now pay the highest average car insurance premiums in the nation: $2,551. Ironically, the lowest average premiums are paid by residents of Ohio, which is directly south of Michigan: $926. The ten most expensive states for car insurance are:

    1. Michigan — $2,551

    2. West Virginia — $2,518

    3. Georgia — $2,201

    4. Washington, D.C. — $2,127

    5. Rhode Island — $2,020

    6. Montana — $2,013

    7. Louisiana — $1,971

    8. California — $1,962

    9. New Jersey — $1,905

    10. Florida — $1,830

Conversely, the 10 least expensive states for car insurance are:

    10. New York — $1,173

    9. Vermont — $1,149

    8. Virginia — $1,114

    7. Wisconsin — $1,087

    6. North Carolina — $1,060

    5. Iowa — $1,058

    4. Idaho — $1,053

    3. New Hampshire — $983

    2. Maine — $964

    1. Ohio — $926

Why Such Variation in Premiums?

So why do car insurance premiums vary so widely from one state to the next — even states that share the same border? There are a number of reasons, including:

  • The number of urban areas in a state.
  • Overall traffic conditions in a state.
  • A state’s insurance laws.
  • How many drivers in a state are uninsured or underinsured.
  • The number of auto thefts in a state.
  • How many car insurance companies there are in a state.

For example, Michigan’s no-fault auto insurance system requires drivers to buy personal injury protection (or PIP) as part of their coverage. While PIP is required in some other states, Michigan is the only state where lifetime PIP benefits are guaranteed. (In New York, PIP benefits are capped at $50,000 in treatment costs, while Florida caps PIP benefits at $10,000.) The higher cost to insurers of providing lifetime PIP benefits is passed on to customers via higher overall insurance premiums.

Michigan also has a relatively high percentage of uninsured drivers — 20% are driving without insurance, compared to the national average of 14%. In financially reeling Detroit, the uninsured driver rate is a staggering 60 percent, making it one of the most expensive cities in the country for buying car insurance. And amazingly, Michigan insurers are allowed to sell seven-day car insurance policies, which many drivers purchase just so they can register their cars and then cancel as soon as their registration is complete.

In West Virginia, which has the second-highest average auto insurance premiums, one of the main culprits, surprisingly, is deer. Drivers are more likely to hit a deer in West Virginia than in any other state — and these collisions can cause a lot of damage and personal injuries. There are also a lot of gravel trucks on the road in West Virginia, which leads to lots of driver claims for cracked and chipped windshields.

On the other end of the spectrum, most of the states with the lowest average auto insurance premiums are largely rural with less traffic congestion and gridlock, which generally results in few accident claims. States with low crime rates and where juries are generally known for not socking insurers with large lawsuits (both of these factors are present in Maine) can also keep their premiums lower.

Due largely to the fact that there are some 660 car insurance companies within its borders — the third highest of any state in the country — and its tight insurance regulations, Ohio has consistently ranked among the lowest-cost states for car insurance. In fact, Ohio drivers will pay about the same amount for car insurance this year on average that they did 12 years ago.

Of course, there are other factors that determine how much you’ll pay for car insurance, including where you live within a state (rural areas are cheaper, as accidents are less likely) and your driving record. While there is not much you can do about the state you live in, you can help keep your car insurance premiums as low as possible by driving safely and avoiding tickets and accidents. And, if you decide to pack up and move to another state to save money on car insurance, drive safely!

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