Written by: Emily Joswiak • June 24, 2022• Auto

Does Where You Live Affect Car Insurance Rates?

Many people don’t realize it, but where you live heavily affects your auto insurance rates. Read here to find out more about this strange insurance strategy.

It may be common knowledge that you where you live affects your auto insurance rates, but many people are in the dark about why this is the case. To clear up some of this confusion, let’s take a look at why where you live affects your car insurance rates.

Does Location Affect Car Insurance Rates?

The state and city in which you live have significant effects on the cost of your automobile insurance. In truth, while determining prices for their policies, insurance firms examine all of the following factors:

Number of claims in your area: This is a no-brainer, because more claims mean higher payouts for insurance companies.
Population density: Accidents are more likely to occur when there are more vehicles on the road.
Weather and climate: Storms, ice and snow, hailstorms, and floods all result in more claims and higher premiums.
Theft and vandalism rates: Greater premiums are associated with higher crime rates, particularly property crimes such as auto break-ins, auto theft, and vandalism.

Why Do Insurance Carriers Care About Location?

Why do insurance companies use all the aforementioned factors when calculating auto insurance rates? The answer is shockingly straightforward: due to these factors, the area in which you live has a significant effect on your chances of being involved in an auto accident. Plus, where you reside heavily influences the expenses of vehicle repairs and medical bills after an accident.

And, as we all know, more claims equals higher premiums—and vice versa. So if you reside in a ZIP code where accidents are regular and result in significant repair or medical costs, it’s understandable that your vehicle insurance provider would want to charge you more.

Keep in mind that if you’re looking to get insurance rates for a commercial vehicle, the cost is likely to be much higher, as there are stricter terms for the eligibility of a commercial vehicle. However, there are several ways to reduce insurance costs for commercial vehicles.

Why Do Rates Differ So Much Between ZIP Codes?

Each state and city has its own set of requirements for minimum liability coverage. Some states require injury insurance of up to $100,000 and property protection of up to $25,000. Other states need as little as $10,000 in medical expenditures and $5,000 in property damage if you’re ready to take the risk.

We hope our recap of why where you live affects your car insurance rates has been helpful. Dealing with these costs can be difficult, but just know that as long as you continually drive in a safe, defensive manner, your insurance rates are likely to go down over time.

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Last modified: June 27, 2022