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Why Car Insurance Is More Expensive In Some States

Auto insurance premiums are influenced by a multitude of factors. Some of them are strictly related to the area where the policyholder lives. The annual report published by the insurance information website Insure.com shows that some states have really expensive premiums when compared with their neighbors. The national average car insurance premium in 2018 is $1,365., according to Insure.com. In some states, the average premium is with 60% or more than the national average.

To understand why some states are more expensive requires an in-depth analysis. The main factors that make premiums skyrocket are:

car insuranceLegislation. For the fifth time in a row, Michigan receives the title of the most expensive state. It’s extremely high average premium of $2,239 (64 percent higher than the national average) is linked with the state’s legislation. Michigan has an “unique” no-fault system that allows the victim to ask for unlimited compensation. PIP limits are regulated at state-level, but in the case of Michigan, there are no limits to medical benefits. Premiums are high in other states with generous PIP coverage limits.

The number of uninsured and underinsured drivers.  A high number of uninsured/underinsured drivers means that the insurers will have problems recovering reimbursement money from guilty drivers.  Florida and Louisiana are perfect examples for this case. In Florida more than 25% of drivers are uninsured, while in Louisiana, the number is around 13%.  As a result, the premiums in Florida is $2,050, which is 50 percent higher than the national average. Louisiana drivers will have to pay on average, $2,126, which is 56 percent higher than the national average.

Population density. A higher density means more cars on the roads and more exposure to traffic accidents.  Rhode Island is the smallest state, but it has a population of over 1 million people. The traffic is highly congested and lots of drivers jam-packed in a small area usually leads to accidents.  The average premium in Rhode Island is $1,852 or 36 percent above the national average.

Criminality. Car theft, riots and vandalism rates differ by state. These factors are taken into consideration by each insurer. States like Alaska, New Mexico or Nevada has the highest car theft rates and premiums reflect this sad reality.

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