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UPDATED: May 25, 2020
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Most of us never consider the difference in car insurance rates across the U.S. It may never even occur to us to call around and request quotes from several different companies that offer car insurance.
The truth of the matter is that there can be vast differences in car insurance premium rates within the same state. Don’t be confused with car insurance rate differences.
The average U.S. car insurance rates are $79.58/mo for full coverage. Understand rates vary between states and according to several factors such as population density, crime rates, and other pertinent influences.
Many people fail to understand that companies insuring cars in the same neighborhoods in the same states can have widely varying rates as well.
These effects are magnified across states, which set their own state minimum car insurance requirements.
Average Car Insurance Rates
It’s hard to establish an accurate average within a single state, where everyone pays the same minimum in liability coverage but likely has far more insurance coverage than only that which is required by law. Establishing an average on a national basis is virtually impossible, for the same reasons.
Data collectors can establish an average of how much individuals pay on a national level, but that still does not account for differences in actual coverage, driver age, driving record, local conditions and other points that influence car insurance companies’ rate setting practices.
Even so, individuals can compare minimum coverage rates across the United States to arrive at a beginning point.
Drivers choosing additional liability coverage, collision, comprehensive, glass, roadside assistance or other add-ons will pay more than those with basic rates, but the national comparison provides information about those basic rates.
State Car Insurance Requirements
Another factor that directly affects car insurance rates across states is the influence of the state insurance commission.
Each state has such a body — though the name can vary from state to state — and this institution regulates car insurance rates and practices within state borders.
States also approve individual car insurance companies to practice within state borders.
Basic coverage requirements, as well as rates for that basic coverage, are set by state insurance commissions, which have to balance the needs of the states’ residents with the needs of the car insurance companies.
If the car insurance companies cannot produce a profit, then there is no point in their taking on the risk. Most states have more than 100 car insurance companies licensed within the state.
What this means for the consumer is that there is healthy competition within the industry in every state. Competition serves to keep prices lower and service levels higher — companies must satisfy their customers, or they will lose them.
Comparing rates used to be cumbersome and time-consuming, but that is no longer the case. Online comparisons are quick, easy, and painless, and they can save individual drivers several hundred dollars each year.
Combinations of Car Insurance Factors
A review of average rates by state reveals insight relative to risk. The highest average car insurance rate in the country is not in a state at all, but rather in the District of Columbia.
Where traffic is heavy–thereby providing ample opportunity for accidents costly for car insurance companies–and crime rates are quite high, the average car insurance rate for basic liability and property damage coverage is $1,126.
At the other end of the spectrum, North Dakota car insurance is the lowest priced state in the nation, with an average car insurance premium rate of $503 for the same coverage that is more than twice as costly in D.C.
Looking at the two, it is easy to see the influence of opportunity for auto accidents combined with average, overall crime rates. That is about where the neat ability to categorize ends, however.
The second-highest average state car insurance premium rate is in Louisiana, most of which is rural, and where crime rates are low outside of New Orleans. In Louisiana, the average annual car insurance premium for state-mandated basic coverage is $1,105.
The second-lowest statewide average rate is in Iowa, where the average car insurance premium for state-mandated minimum liability and property damage coverage is $519.
Location and Cost of Living
These examples demonstrate that higher population and higher crime negatively influence average care insurance premium rates, but they fail to account for other factors. One obvious additional influencing factor is the average cost of living in each state and the District of Columbia.
One obvious influencing factor is the average cost of living in each state and the District of Columbia.
Review of the hierarchical list of average state car insurance rates indicates that rates are indeed higher where there is a higher crime rate, but those rates also are higher where the average cost of living is higher.
Kansas, Idaho, Nebraska and South Dakota fill the 46th through 49th slots on the list of decreasing average annual car insurance premium rates. Following the District of Columbia and Louisiana, places three through seven are New Jersey, Florida, New York, Delaware and Rhode Island.
These are not states with particularly high crime rates on a state-wide level, and other than in the area of New York City, most are not known for any spectacular traffic issues.
Each has a higher average cost of living than the continental United States, however. Doubtless, the local cost of living directly influences the cost of car insurance in various states of the nation.
Car Insurance Comparison Recommendations
It almost always pays to compare rates on a regular basis. Young drivers’ coverage should be compared every one to two years; older drivers should compare rates every five years.
It is a fact that younger drivers are more likely to be involved in at least one car accident, so virtually all car insurance companies charge younger drivers a higher premium rate for car insurance.
As they age out of that high-risk age group, however, their rates should change by the laws of the state in which they live.
Some car insurance companies make that adjustment automatically, but others do not. Those that do not make the change without a direct customer request are those seeking to maximize profitability without increasing prices or rates.
Some individuals would condemn these companies for continuing to charge higher premium rates, but others hold that individuals should be responsible enough to stay on top of the changes that influence their car insurance premiums.
The key lies in seeking alternative car insurance quotes periodically. A young driver just aging out of the highest-risk age bracket should be seeking an alternative comparison quote about every year.
A slightly older driver will not be subject to such significant differences in car insurance premiums, and likely should seek alternative quotes every two or three years.
At the other end of the spectrum, older drivers reaching beyond middle age probably should not seek comparison quotes quite as often as middle-aged or younger drivers.
Premium car insurance rates for older drivers tend to increase with age, so if the driver’s current car insurance company fails to update its premium rates as drivers move toward retirement age and beyond, then paying lower rates is to the older driver’s advantage.
The Bottom Line for State Car Insurance Rates
The key for all drivers of all ages is to be aware that there can be immense differences in car insurance premium rates within the same city for the same age groups. Comparison pits one car insurance company against another in direct competition for local customers.
Competition is a good thing for customers, and though it can seem to businesses that direct competition is not an entirely good thing, the fact is that competition forces businesses to be more competitive and to pay more attention to customers.
If they seek to be more relevant to customers than their competitors, competition is the tool by which customers judge companies relative skill in meeting customers’ needs.
While it is unlikely that a D.C. driver will gain North Dakota rates simply through comparing local car insurance rates, it is quite possible that the D.C. driver can drop from the high figure of the average to the low side of the average.
The distinguishing factor is the driver’s willingness to put some effort into comparing rate quotes about once a year.
Comparing rates takes little effort — particularly when making those comparisons online — but it can return significant savings.