How do States Determine Their Auto Insurance Prices?

Auto insurance prices vary greatly from state to state. Each state has specific factors that determine where these rates begin.

What this means for you is that living in one state could cost you a lot more to drive than if you live in a neighboring state. Where are the lowest insurance rates? Where are the highest rates? Why have some states increased or decreased their average insurance costs over the past few years? Let’s dig deeper and see what causes these rates to be set where they are.

It’s a Story of Legislation and Regulation

Statistics, local laws, and risk factors are all calculated and considered when it’s time to determine the insurance rates in a particular state. Other factors can be the environment, seasonal changes, and the amount of traffic in the average area of the state. While there are some statewide rules that cover the entire state, city areas may have more expensive insurance rates than what you might find in rural parts of the state. Because it’s up to the laws and regulations of the state to determine the insurance rates, the price varies greatly from state to state.

Looking at the Ying and Yang of Auto Insurance

Your auto insurance rates are set by the state you live in. Let’s look at some interesting takeaways you can think about regarding insurance rates over the past couple of years.

• Michigan is the most expensive state for full coverage at an average of $4,003 per year, which is three times the national average.

• Maine is the least expensive state for full coverage at an average rate of $589 per year, which is 53.4 percent below the national average.

• For minimum coverage, Michigan is the most expensive at $2,653, and Wyoming is the least expensive at $284.

• The pandemic has impacted auto insurance rates with an average decrease of 2.7 percent across the country.

• Michigan has seen the largest decrease in premiums with a 25 percent drop, while South Carolina has had the largest increase at 4.3 percent.

• Since 2015, the national average of auto insurance prices has been flat, but Montana increased rates 37 percent in that time while New Jersey lowered its rates by 30 percent.

Do some of these results surprise you? It might seem strange not to see some of the most populous states as the most expensive.

Other Factors that Determine the Price You’ll Pay

The area you live in is only one factor in the price you’ll pay for your car insurance. If you know you’re going to live in that state, you’re not likely to move just to have lower auto insurance premiums. With that in mind, let’s look at several other factors that impact the price of your car insurance.

Age

Younger drivers will pay a lot more than drivers that have reached 25 years old. This works in reverse once you reach 65 in most areas. Statistics and risk factors are considered to come up with the prices that you will pay based on age.

The Vehicle You Drive

Trucks are often cheaper to insure than a sedan because of the rugged toughness of the build that can sometimes take a hit and not receive much if any, damage. Vehicles that have been rated as some of the safest are the most affordable to insure. High-priced cars that are targets for thieves are more expensive to insure.

Your Driving Record

If you have multiple traffic violations that you’ve pled guilty to by paying the ticket, your auto insurance rates are going to be higher. This puts you in the high-risk category for insurance. If you receive a ticket for a traffic violation, hiring an attorney and working on getting the ticket dismissed is going to cost you a lot less in the long run.

Driving Frequency

Insurance rates dropped during the pandemic because many people were forced to stay at home and weren’t on the road. The amount of miles you drive every year impacts the amount you’ll pay for the insurance on your vehicle. If you’re not behind the wheel, you’re not likely to be in a car accident.

Credit History (In Most States)

It might sound unfair that your credit history has anything to do with your auto insurance prices, but in 47 states, that is the case. Drivers with poor credit will pay an average of 71 percent more than those with good credit. Only California, Massachusetts, and Hawaii disallow insurance companies from taking your credit score into account.

Marital Status is a Factor

Married drivers are statistically less likely to be in an accident, which means an insurance break for you if you’re married. The numbers are significant, with 50 percent fewer accidents for drivers that are married compared to other drivers. If you’ve recently tied the knot, let your insurance company know so you can reap the rewards.

Gender is Still a Factor

Because insurance companies use statistical data to determine auto insurance rates, all factors are considered, including gender. Men age 45 pay an average of six percent less than women of the same age. Conversely, teenage male drivers pay the most for car insurance. Divers in their 30’s don’t see as much of a fluctuation as other ages.

Experience Matters, but You Might Not Notice

The number of years you’ve been driving is another factor in determining your insurance rate. Unfortunately, if you’re living in an area where the rates have increased when you reach some of the magical experience levels that cause rates to drop, you might not notice a change in your price.

What Should You Do to Pay Less?

No one wants to pay more for their auto insurance rates than they have to. Where you live is one of the largest factors in how much you’ll pay, but aside from moving, you don’t control that factor. What you do control is your driving record, the vehicle you drive, your credit history, and how often you drive. Control the factors that you can and ask your insurance company for any discounts they might have available to you.