The Most and Least Expensive States for Car Insurance

February 20, 2017

Feel like your car insurance is way too expensive? Blame the state you live in. Where you live has a huge effect on your car insurance rates — so much so that the average annual premium in Michigan is more than five times the average in North Carolina, according to new data from Compare.com.

Crazy, right? Why does this happen? Which states have the most expensive car insurance and which states have the cheapest?  We’ve got your answers here.

The Most Expensive States for Car Insurance

compare auto insuranceWhen we examined thousands of Compare.com users’ annual premiums from the past 12 months, Michigan residents paid the most. Rounding out the top five most expensive states are Florida, New Jersey, Connecticut and New York.

Why Michigan car insurance is so expensive

Michigan auto insuranceMichigan is extremely generous to car crash victims. If you’re hurt badly in an accident — even if it was your fault — Michigan’s no-fault policy requires insurance companies to pay for all the medical care you need, in addition to reimbursing you for up to 85 percent of your lost wages (for up to three years).

As a result, personal injury protection (PIP) fraud is rampant. Attorneys encourage car accident victims to run up large (and unnecessary) medical bills, and then pocket a percentage of the bill. Some people even fake accidents, then split the insurance payout with the doctor or chiropractor.

Other factors make Michigan’s car insurance expensive too, such as the high frequency of car thefts in Detroit and the use of credit scores to determine auto insurance rates.

Why Florida car insurance is so expensive

The average Compare.com customer pays $2,495 for Florida car insurance — the fifth highest rate in the U.S. Compared to Michigan, Florida has lower limits on insurance payouts, but PIP fraud still drives up car insurance rates in Florida. Gov. Rick Scott put an annual price tag of $1 billion on PIP fraud in Florida.

Why New Jersey car insurance is so expensive

In New Jersey, the average insurance premium is $2,727 — less than half of Michigan’s. Nevertheless, NJ auto insurance rates aren’t cheap. It’s an urban state, and the proximity to New York City drives up rates. Also, residents tend to opt for higher coverage levels.

Why Connecticut car insurance is so expensive

The average Compare.com user pays $2,703 for Connecticut car insurance. Again, Connecticut’s proximity to New York City and relative wealth drive up insurance rates.

Why New York car insurance is so expensive

New York car insurance costs $2,715, on average — just a little more than Connecticut’s. Even if you live in a more rural area, about 88 percent of New York state residents are urban, according to Iowa State University — hence higher car insurance rates.

The Least Expensive States for Car Insurance

NC auto insuranceWhat do the cheapest states for car insurance all have in common? In general, they tend to be rural, and state regulations allow for intense competition among insurers. Let’s take a look at the five least expensive states for car insurance.

Why North Carolina car insurance is so cheap

North Carolinians enjoy all the best things in life: great barbecue, great beaches and the lowest auto insurance rates in the country. The average North Carolina customer on Compare.com pays just $1,029 in annual premiums — that’s less than a fifth of what Michigan auto insurance rates cost.

Why is NC auto insurance so cheap? The state caps insurance rates, forcing insurers to offer a ton of discounts in order to compete. North Carolina is also a largely rural state, which means fewer vehicle thefts and fewer crashes.

Why Iowa car insurance is so cheap

The next cheapest state in Compare.com’s list is Iowa, another rural state. Iowa actually has more cows than people! The average Compare.com user pays just $1,047 in annual premiums. Iowa also has low minimum insurance requirements: $20,000 bodily injury liability per person/$40,000 bodily injury liability per accident/$15,000 property damage liability per accident.

Why Wisconsin car insurance is so cheap

Wisconsin car insuranceWisconsin’s a rural state with a competitive insurance market, so rates are low. The average Wisconsin driver on Compare.com pays $1,157 per year.

Why Alabama car insurance is so cheap

Alabama’s about as country as it gets. Just 59 percent of residents live in urban areas, which drives auto insurance rates way down. On Compare.com, Alabama drivers have the fourth-cheapest car insurance rates, averaging $1,206 per year.

Why Indiana car insurance is so cheap

The fifth-cheapest state for car insurance premiums, according to Compare.com’s numbers, is Indiana. There, the average driver pays $1,243 per year. Indiana insurance regulations require rates to be “fair, adequate, and not excessive or unfairly discriminatory,” and encourage competition in the marketplace.

The Best Way to Lower Your Car Insurance Rates

Wherever you live, you don’t have to accept high insurance rates. Whether your driving record is spotty or spotless, you can shop around for a better deal and better coverage. Here are a few ways to save:

  • Drop collision coverage. If you drive an older car, it may be smart to cancel collision coverage, which pays to repair damage to your own car when you’re at fault. We ran the numbers on when it makes sense to drop collision.
  • Consider signing up for a telematics program. You can get a discount on car insurance if you let your insurer track your driving habits with a little electronic device. Learn how telematics works.
  • Stop speeding. Having a clean driving record is the best thing you can do to lower your insurance rates.

Compare auto insurance quotes on Compare.com. Instead of spending hours getting quotes from multiple insurers (and entering your personal information again and again), you can get multiple free quotes in minutes. Try it today!

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You could save up to 32% by using Compare.com!

Based on a survey of 100 California Residents. Average savings determined via a comparison of their selected policy against their self-reported annual premium.