John William Lambert, an inventor, was testing out his new “horseless vehicle” in 1891 when he ran into a hitching post. Minor injuries resulted from his highest speed being only 5 miles per hour (8 kilometers per hour). But it’s also a given that Lambert didn’t have insurance to protect him in this, the first car accident ever recorded.
Since then, a lot has changed. All states today mandate that drivers carry insurance, and the total cost of your insurance over the course of your car’s lifetime may exceed the price of the vehicle itself. Insurance companies base their prices on a variety of factors, including your age, driving history, marital status, and the sort of automobile you drive, as you are surely aware. But you might be surprised to learn that your insurance premium is significantly influenced by where you reside. The explanation is straightforward: Your area of living affects both your risk of suffering an accident and the potential financial costs of the incident. Higher premiums are a direct result of more claims.
In order to assess how much of a risk you might be, insurance firms will probably ask you a number of questions regarding your local area:
- How many people live there? Drivers in cities typically pay more than their peers in the countryside. Simply put, more automobiles lead to more collisions. For instance, Vermont has some of the lowest rates in the country. many deserted roads.
- How is the weather today? Skids and collisions result from snow and ice. But rate increases don’t just occur during harsh winters. Oklahoma occasionally has severe hailstorms that damage autos. Increased premiums may also result from a flood-prone neighborhood.
- Do you reside in a violent neighborhood? Insurance companies are not interested in grand theft auto. Vandalism and break-ins also increase claims and rates.
- Are the local roadways well-maintained and designed? Accidents and insurance claims may be fueled by potholes and unsafe intersections.
The rates that insurance companies offer you take the answers to these questions into account. But things only become trickier from there. Some unexpected location-related issues that can increase your rates are listed below. Continue reading to learn what they are.
Other Local Factors That Affect Rates Besides Collisions and Break-Ins
When deciding your insurance rates, insurance firms take into account more factors than only the regional circumstances that may result in accidents. The law regarding medical benefits in your state is one thing to take into account. For instance, Michigan mandates that insurers reimburse victims for up to three years’ worth of lost income and gives unrestricted personal injury protection. As a result, the state has some of the highest rates in the country.
Additionally, rates may be impacted by the state’s judicial system. In Louisiana, judges typically decide how much an accident victim is entitled to in damages; a jury is only called upon when the claim exceeds $50,000. The insurance firms spend more and transmit the expense to the consumer since elected judges frequently award harmed parties larger damages [source: MSN.com]. Some insurance companies even adjust their prices based on the local area’s lawyer population density. More attorneys mean more lawsuits.
There are more uninsured drivers on the road in some locations, especially those with high unemployment. Your insurance provider must pay if one of them strikes you. Higher premiums for those who do have insurance as a result.
On the other hand, the competition between insurance providers might result in cheaper premiums. In a state like Vermont where there are fewer accidents, more businesses compete for your business, creating a buyer’s market.
It matters where you keep your car as well. If you keep your car in a safe garage and live in a city, you might be eligible for a discount on your insurance premium. How far you reside from a job or school is another consideration. Frequently, a shorter commute results in a reduced rate.
When everything is taken into account, it is obvious that your zip code can significantly affect the cost of your auto insurance. But is that equitable? Should a region’s drivers be punished for having busy roads or a high crime rate? Some people contend that doing so constitutes discrimination because it amounts to racial or economic profiling. California voters approved Proposition 103 in 1988 to prevent insurers from charging clients more because of where they reside. According to the law, businesses must base their rates primarily on a person’s driving history, driving experience, and annual miles.
But residents of the majority of other states continue to struggle with premiums that change depending on where they live. Also, don’t think that by not telling your insurance provider that you are moving to a higher-rate area, you can avoid the increase. If you haven’t changed your address, the company can decline to pay a claim.
If John Lambert were still living today, he might be happy to know that drivers in his native Ohio pay some of the least for their horseless carriage insurance in the nation [source: MSN.com]. If you’re less fortunate, there is only one surefire way to avoid paying the rate applicable to your location: sell your car and put on your walking shoes.
Every insurance policy contains a certain paradox. When I insure my car, house, health, or life, I’m placing a bet that I’ll get into an accident, burn down my house, go ill, or get hit by a train. Insurance company is placing a bet that I’m not. Additionally, the deck is stacked in their favor.
As I was writing this piece, I began to consider how convoluted the situation actually is. Insurance providers and authorities must strike a balance between distributing risk equally among all parties and raising premiums for those who are more likely to make a claim. It raises a variety of issues. If I construct a home in a flood plain, should my homeowners insurance cost more? If I’m under 25, does auto insurance cost more? If I smoke, my health insurance costs more?
Two things are evident. One is that there aren’t any simple solutions. The other is that you will undoubtedly believe your insurance prices are excessively high, regardless of what they are.