Auto insurance costs and where you live.

What’s driving the costs of your car insurance? It could be your driving record; at-fault accidents and speeding tickets won’t do you any favors. It could be the car you drive: A 20-year-old clunker is probably going to be cheaper than a brand new, foreign sports car.

These reasons all make sense, but many people don’t realize how much their location affects their rate. This was underscored by a recent survey done by Insure.com showing the most expensive and least expensive auto insurance costs by state. The full list is repeated below.

So why does it matter where you live when it comes to car insurance? You would think that car insurance rates by state would be fairly equal.

Auto insurance rates — insurance rates in general, in fact — are primarily based on risk such as:

  • What are the chances (risk) that a particular insured person will make a claim?
  • What is the risk that a particular situation can cause a claim?
  • What is the risk that a claim on an insured can be very costly?

Location matters because it can vary the amount of risk an insurance company projects. For example, hailstorms can cause significant damage to vehicles. Thus, an insurer may charge a higher rate if you live in an area where hailstorms are frequent. Or, perhaps you live in an area with a high rate of car theft and break-ins. The risk that you will make a claim goes up, and most likely so does your rate.

According to the Insure.com article, uninsured motorists are one of the big factors affecting rates. You see, most states require some sort of uninsured/underinsured motorist coverage when you buy a policy. So if a driver causes an accident and doesn’t have liability insurance (which is also required by law), your policy will provide some coverage to your vehicle and passengers that would have been covered by the other driver had he or she been insured.

As you can imagine, the more claims being made for uninsured drivers, the higher the risk and up goes auto insurance costs.

So, states with a higher number of underinsured and uninsured motorists are going to have higher rates. Also, states where more personal injury claims are filed are also going to drive up costs. The article notes that the economic downturn has caused many people to forego auto insurance. But when someone drives without insurance, we all pay the price.

Here is the list of the most and least expensive states for auto insurance in 2011 based on average annual premium (source: Insure.com):

  • Michigan, $2,541
  • Louisiana, $2,453
  • Oklahoma, $2,197
  • Montana, $2,190
  • Washington, D.C., $2,146
  • California, $1,991
  • Mississippi, $1,896
  • New Mexico, $1,837
  • Arkansas, $1,836
  • Maryland, $1,807
  • North Dakota, $1,794
  • Connecticut, $1,786
  • Rhode Island, $1,747
  • Wyoming, $1,714
  • Hawaii, $1,707
  • South Dakota, $1,707
  • Georgia, $1,670
  • New Jersey, $1,663
  • West Virginia, $1,633
  • Kentucky, $1,629
  • New York, $1,627
  • Minnesota, $1,614
  • Washington, $1,584
  • Missouri, $1,563
  • Indiana, $1,518
  • Colorado, $1,508
  • Texas, $1,492
  • Delaware, $1,489
  • Florida, $1,476
  • Nebraska, $1,470
  • Pennsylvania, $1,468
  • Kansas, $1,461
  • Alaska, $1,454
  • New Hampshire, $1,334
  • Massachusetts, $1,328
  • Idaho, $1,325
  • Alabama, $1,306
  • Oregon, $1,306
  • Nevada, $1,300
  • Illinois, $1,290
  • Arizona, $1,280
  • Utah, $1,272
  • Virginia, $1,237
  • Iowa, $1,179
  • North Carolina, $1,154
  • Ohio, $1,152
  • Tennessee, $1,146
  • Wisconsin, $1,128
  • Maine, $1,126
  • South Carolina, $1,095
  • Vermont, $995
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