Why does auto insurance vary from state to state?

Many factors go into a state's auto insurance rates, from laws to population density. Rates for liability coverage range from $298 in North Dakota to $869 in New Jersey.

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Mathew B. Sims is Editor-in-Chief and has authored, edited, and contributed to several books. He has been working in the insurance industry ensuring content is accurate for consumers who are searching for the best policies and rates...

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance...

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Reviewed byDaniel Walker
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UPDATED: Apr 23, 2020

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Things to Remember...

  • Each state determines their own rules and regulations regarding auto insurance, and it is your responsibility to know the differences when you move to a different state
  • Because requirements and rates vary from state to state, you may find vastly different rates for the same insurance company
  • The insurance industry is regulated and monitored by a department of insurance in each state
  • Another important variation between the state’s insurance laws is that some states are considered no-fault and others are tort. In a no-fault state, the driver of a vehicle is responsible for injuries to passengers in his vehicle regardless of fault

If you have ever moved from one state to another, you may have noticed that auto insurance rates, premiums, and minimums vary from state to state. You may have noticed this when trying to buy car insurance in a new state.

Each state determines its own rules and regulations regarding auto insurance, and it is your responsibility to know the differences when you move to a different state.

Forty-nine of the states have compulsory auto insurance laws on their books. New Hampshire remains the only state without this requirement, though there is a requirement to show that you have sufficient funds to meet specified financial requirements.

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State Auto Insurance Differences

There are three main reasons for the differences:

  • Minimum auto insurance requirements – Most states have minimum liability requirements, and this help determine the rates in each state
  • Cost of living – States with higher costs of living may also have higher insurance rates
  • Population density – The probability of accidents occurring is greater in areas with higher population densities. More people and more accidents, the higher the rates

Because requirements and rates vary from state to state, you may find vastly different rates for the same insurance company. Auto insurance companies may have the lowest rate in one state, but may not be the lowest in another.

Because of these variations, it is essential that you shop around when you move to a new state. Don’t assume your company has the lowest rate in your new location. Always comparison shop when you move.

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Auto Insurance Overview

The insurance industry is regulated and monitored by a department of insurance in each state.

The main responsibility of these state government agencies is to make certain insurance carriers in their state are following ethical business practices by doing the following:

  • Licensing insurance carriers
  • Checking on the financial stability of each carrier licensed in the state
  • Licensing individual agents and brokers
  • Ensuring that all carriers, brokers, and agents are in compliance with state laws
  • Providing help for consumers
  • Providing education to residents and advocating for reforms that protect consumers

Any time you move to another state, it is important to let your insurance carrier know as soon as possible. This notification should ideally be done prior to the move for five main reasons:

  • To determine if your insurer does business in your new state
  • To see if minimum liability requirements are different
  • To find out what the new rates will be with your existing insurance carrier
  • To have time to comparison shop for auto insurance in your new state

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Finding Auto Insurance in a New State

Here are some steps to follow as a part of the moving process:

  • Tell your insurer Inform your insurance carrier or agent of your impending move. Not doing so may have you facing penalties and loss of insurance.
  • Inform your state Go to the state’s department of insurance website and research the minimum liability laws and other state requirements.
  • Comparison shop for new coverage You can do this by phone, in person, or online. Online auto insurance comparison shopping is convenient and easy. If your existing company’s rates are acceptable, the carrier will handle the change in policy.
  • Cancel your old policy – If you don’t cancel your current insurance, you may be paying double premiums for a time. Don’t set your cancellation date before the start date of your new auto insurance policy; you don’t want to be without insurance coverage.

Types of Auto Insurance Coverage

Another important variation between the state’s insurance laws is that some states are considered no-fault and others are tort. In a no-fault state, the driver of a vehicle is responsible for injuries to passengers in his vehicle regardless of fault.

All states that are no-fault states require vehicle owners to have personal injury coverage. In tort states, drivers who have been determined to be at fault, or their insurance carriers, are responsible for the cost of the injuries.

Twelve states have no-fault auto insurance, including New York and Florida. In three states, Kentucky, Pennsylvania, and New Jersey, vehicle owners are allowed to select either a tort or a no-fault policy.

Some states have requirements that vehicle owners carry uninsured motorist coverage. This protects you if you sustain injuries in an accident caused by an uninsured driver. Uninsured motorist requirements protect drivers, and their insurance carriers, from the negligence of others.

Every state, except New Hampshire, requires motorists to carry a minimum amount of liability insurance coverage.

The minimum amounts for bodily injury range from $10,000 to $50,000 per person, and $20,000 to $50,000 for all injuries. The minimum amount of coverage required for property damage ranges from $5,000 to $25,000.

The majority of states will not register your car without being shown proof that you carry auto insurance coverage. Other states, such as Illinois, though requiring that you have insurance, do not need to see proof when registering your vehicle.

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Different Auto Insurance Requirements of States

New Hampshire’s motto is “live free or die”, and it lives up to the “live fee” part by being the only state in the nation that does not have a law requiring motorists to carry a specified amount of liability coverage.

New Hampshire is a tort state; all expenses resulting from an accident for which you are deemed at fault will be your responsibility. Because of this, many residents decide to carry auto insurance even though it’s not mandated by law.

However, people who have been convicted of certain crimes, including DUI, may be required to purchase auto insurance. Some car dealers in the state also require people who finance or lease vehicles to carry insurance.

Each state also has different insurance rates due to minimum policy requirements, cost of living differences, population density variations, and weather.

Don’t assume your existing carrier has the best rate in each location as their rates vary from state to state. Every time you move, it is essential to spend some time shopping around for the best auto insurance coverage and rate.

Use our FREE online tool below to start comparing auto insurance rates in your state!

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