How Location Affects Car Insurance Rates

Your premium could go up or down because of the location of your home. Here's how your ZIP code or city can have a big effect on your auto insurance rates.
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Everyone pays a different amount for auto coverage. Insurance companies use many different factors to determine your premium, including some beyond your control like gender or age. Where you live and park your car can also have a major impact on rates.

The location of your home can either result in higher or lower rates. This will depend on facts and statistics that relate to your area neighborhood. Insurers will raise your rates if they feel that your city poses a higher risk of costing them more money. For example, drivers in cities with above average accident and crime frequency pay higher rates. But there are less obvious ZIP code considerations that drive premiums higher.

In this article, you’ll learn about how insurance carriers use where you live as a way to determine your rates. This includes a breakdown of what insurers consider when they assess a locale’s risk. This will you help you find out if your city, community, or ZIP code are the reason your auto policy is so expensive.

City vs. Rural Areas

Whether you live in a big city or not can have an impact on your rates. People living in urban neighborhoods will end up paying more for their coverage than those who reside in rural areas. Large cities are more densely populated, which presents a higher likelihood of crime and accidents. Simply put, you have a higher chance to get into an accident in heavy traffic than you do on a street with only a few cars.

Crime Is a Big Factor

Crime is a major reason why your rates could be high. Insurance providers look at car break-ins, theft, and vandalism statistics when they consider raising your rates. Large cities typically experience far more crime than a small town would. For example, San Francisco sees about 74 car break-ins per day.

Where You Park Your Car

Insurers don’t just look at your home’s location when they determine your rates. They’ll also consider where you park your car. If you park your car on the street instead of in a parking garage, you could see a bump in your rates. To lower your costs, you should think about parking your car in safer spots, such as a garage. This is especially true if you live in an urban area rife with car thefts and vandalism.

Number of Claims and Uninsured Drivers

Another factor that insurance companies consider is if your home’s local vicinity has a high number of claims. More accidents and claims in the area present a larger risk to providers. It also means that your area is generally costing insurers more money. This means you’ll likely end up paying extra.

Providers also look at the number of uninsured drivers near your home. Getting into a collision with a driver without coverage means you’ll end up paying more money. It also means it costs your insurance provider more because of the potentially expensive costs of repairs after an accident. Insurers consider areas with more uncovered drivers a higher risk because it’ll likely result in more claims. This makes premiums in these places pricier than others.

Per the Insurance Information Institute (III), these are the top five states with the most uninsured drivers based on the percentage of drivers who are without coverage:

  1. Mississippi – 29.4%
  2. Michigan – 25.5 %
  3. Tennessee – 23.7%
  4. New Mexico – 21.8%
  5. Washington – 21.7%

Weather Can Play a Role

Many companies factor a region’s weather patterns and climate into premiums. Weather and natural disasters cause significant damage to vehicles. This results in a flood of expensive comprehensive claims.

Living in a city or state that experiences severe weather conditions can cause your rates to be higher. Severe weather usually refers to conditions that cause accidents or damage to your car. Here are the types of weather conditions that could potentially damage your car:

  • Hail
  • Hurricanes
  • Tornadoes
  • Snow
  • Flooding
  • Wildfires

Before moving to a new state or city, you should look into what type of weather is common in the area. If storms and harsh winters are the norms, you should think twice about moving there. There will likely be more claims in the area to drive your rates up. Storms and natural disasters can also pose a risk to your car. Living in an area with bad weather can end up being expensive for you in the long run.

Other Reasons Why Location Affects Rates

There are several other reasons why your ZIP code can affect your rates. State rules and infrastructure can play a role in how much you pay for coverage. The behavior of other people in your vicinity will also have an impact. Here are some other ways how where you live can affect your premiums:

Road Conditions

Local road conditions are a factor that insurers look at. Potholes and poor street infrastructure around your city can cause your rates to be higher. This is because they can cause more accidents and claims in the area.

Insurance companies will also look at certain areas of a city that result in more claims than others. This includes specific intersections, roundabouts, or roads. The same principle always applies here. More claims usually equal higher rates for you.

Locations with Higher Unemployment

You might see higher coverage costs if your city has a higher unemployment percentage. This is because unemployed drivers seem to be more likely to drive without insurance. In a 2009 study, the III found that there seems to be a direct correlation between unemployed individuals and uninsured motorists.

State Requirements

A state’s minimum policy requirements also a factor into your rates. Each state has its own rules including required insurance and limits. New Hampshire and Virginia are the only states that don’t require any coverage to drive.

You could pay higher rates if your state requirements are too low to pay for most repairs. This is because almost any major crash will exceed policy limits, with repair and medical costs being what they are. When an at-fault driver’s policy doesn’t cover the costs of an accident, they are considered underinsured.

Getting into a car accident with a driver with either no coverage or not enough to cover expenses can leave you helpless afterward. This costs you and your provider more money. Insurers will likely charge higher rates in areas with high numbers of under or uninsured drivers.

Living in a More Affluent Area

Living in a wealthy or more expensive part of town could cause you to pay more for your auto coverage. Affluent areas usually equate to more expensive cars being around. Hitting a Rolls-Royce is much more expensive than if you did the same to a Honda Civic. Expensive cars generally cost way more to repair and replace. At times, these costs will exceed your policy limits. More expensive claims in the area will likely mean you pay higher rates.

Wealthy areas could also mean a higher likelihood of you getting sued. This is because rich people have the capital to pay for expensive lawsuits. Lawsuits can take a toll on you and your auto insurance company. If you live in an area with a high standard of living, you should expect your rates to be a little higher.

How to Lower Your Rates

There’s still hope to lower your rates if the location of your residence is making them soar. You should consider using several methods at once to improve your costs. Here’s what you can do:

  • Qualify for discounts. You can lower your insurance premium by getting several discounts. Often, these can knock a big percentage off of your rates. Check with your insurer or agent to see if there are any missed discount opportunities.
  • Shop around. You may be overpaying for coverage. It’s a smart idea to occasionally compare quotes from several companies to see if you’re getting the best deal.
  • Drive safely. Maintaining a safe driving record will keep your rates as low as possible. And if you can put together enough claims-free years, you could receive a discount.
  • Drive less. If possible, keeping your mileage to a minimum will result in a cheaper premium. You could even switch to pay-per-mile or telematics-based plan, so you only pay for what you need.
  • Move. This may sound extreme, but if you simply can’t afford what you’re currently paying, it might be smart to pack up and move. For instance, moving from an urban to a rural area can lower your rates by a wide margin.

Frequently Asked Questions

Is coverage expensive if you live in a city or urban area?

You could pay more for coverage if you decide to move to a city from a small town. Cities are more populous and simply have more cars on the road than rural areas do. This can result in more accident claims, uninsured drivers, and crime. Insurers consider all of these factors and will raise your rates accordingly.

What happens to my auto policy if I move?

Your rates could go up or down depending on where you move. Moving to a city with a bunch of risk factors could cause your rates to go up. Areas with rough weather conditions can also cause a spike in your coverage costs. Do some research about the region where you plan to move. That’s how you can prepare for adverse weather conditions and local risk factors. In addition, less populated areas cost less for your policy than cities.

If you’re moving to a different state, ensure you meet the minimum coverage requirements. Each state makes its own rules regarding insurance. That means your current policy might not comply with your new state’s regulations.

Why did my rates randomly increase?

Your rates can randomly increase for several reasons. One of those reasons is where you live. This is usually for something that’s not even related to you at all. Accident claims might have gone up in your area. Or perhaps auto theft and crime are on the rise in your area. It’s also possible that there are more uninsured drivers out on the road. These are both reasons for your premium to randomly rise.

What happens if you lie about where you live for cheaper rates?

Occasionally, people falsify their home address to get cheaper rates. However, bending the truth is a bad idea. In fact, it’s fraud because you’re misrepresenting information crucial to your policy.

If you lie about your primary residence, you could lose your coverage. Your provider may cancel or choose not to renew your policy. An offense as serious as fraud is likely to affect your insurance score severely and force insurers to label you as high-risk. With this status following you around, companies could deny you a policy in the future, making it hard to get coverage.

Why is car insurance cheaper in some areas?

Auto coverage is cheaper in some areas, for the most part because drivers experience fewer accidents, which leads to a lower claim frequency. This is especially true in rural areas with a lower population density, which translates into fewer motorists. Also, rural ZIP codes generally experience lower crime rates and cost of living than metropolitan areas.


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