Car Insurance Rates Change According to State

Car insurance rates change according to states due to different driving laws, traffic statistics, and economic factors. Your individual car insurance rates by state are also affected by your driving history and your credit score. Enter your ZIP code below to start comparing car insurance quotes by state with our free comparison tool.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Jan 24, 2021

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Here's what you need to know...

  • There are a seemingly unlimited number of factors that go into determining how much you pay for car insurance
  • The state where you live can greatly affect the cost of your car insurance
  • There are varying conditions throughout the states that have an impact on car insurance rates
  • The differences in car insurance rates between states is directly tied to the political, economic, geographic, and demographic conditions

Drivers in Indiana may pay half of what those in Louisiana with identical coverage pay, as demonstrated by statistics published by the Insurance Information Institute.

The different rates are not necessarily a direct reflection on drivers themselves.

It’s also important to note that insurance companies consider all of these state factors and use a complicated formula to average them together to come up with a price that is the baseline for all customers in that state.

You can see online car insurance quotes from companies licensed in your state by entering your ZIP code below.

How are politics involved in setting car insurance rates?


Each state sets its own minimum requirements for basic liability coverage. This basic coverage is there to protect drivers against financial loss from:

It doesn’t cover things like collision damage, glass replacement, and so on.

The important thing to realize is that these limits are generally set by either state legislatures or regulatory agencies. And because these entities are highly politically oriented, Blue (liberal) states tend to have higher insurance rates than Red (conservative) ones.

Although very few states openly charge car insurance customers sales and use taxes on insurance policies; instead they do so by using different terminology.

For example, your insurance policy declarations may show a specific state surcharge being applied to your policy.

Regardless of the terminology, if the government collects money from citizens, it is taxation. Once again, blue states tend to have more fees and surcharges than red ones.

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What about more rural states versus those states that are more urban?

Population density and the number and size of cities all play a big role in determining insurance rates. For example, states like New York, Pennsylvania, and Massachusetts tend to lean toward larger cities with more dense populations.

By contrast, farming states like Iowa and Nebraska have fewer cities, and fewer drivers as well.

It stands to reason that the fewer drivers on the road, the more rural roads there are, the less potential there would be for accidents which helps keep insurance rates lower.

Population density is such an important factor that even drivers within the same state can notice a significant difference according to where they live.

For example, a driver living in New York City is a much higher risk in terms of both accidents and theft than a driver living in the upstate New York community of Manchester.

The Manchester driver will pay significantly less than the New York City driver just based on his location alone.

Does the economy have anything to do with it?


Like it or not, car insurance is a profit-driven business. That means where car insurance companies are more likely to take higher losses they will also pass that on through higher premiums.

In states where the economy is healthy this is very noticeable through new car purchases.

In these states, people are more likely to purchase new cars. Since new cars cost more to replace after an accident, it stands to reason that insurance premiums in those states would be slightly higher.

By contrast, states with poor economies are those where drivers are much more likely to purchase used cars and drive them longer.

As the value of those used cars goes down, they cost less to insure.

Along the same lines, a faltering economy generally means consumer prices drop all across the board. As a result, damaged cars are less expensive to repair and thus, less expensive to insure.

Are there any other state factors involved?


There are some other state factors involved including education and income level.

Perhaps the most significant factor remaining is that of tort law which is a law governing civil lawsuits and how they apply to various industries.

A state with more liberal tort laws tends to see higher monetary judgments against car insurance companies that lose their cases. Where tort law is more liberal, insurance rates are noticeably higher.

Regardless of which state you live in, we have a search tool below that will help you find great car insurance rates online simply by entering your ZIP code.

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Enter your ZIP code below to view companies that have cheap car insurance rates.

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