The Top 5 Most Expensive and Least Expensive States for Auto Insurance
A recent study done by CarInsuranceQuotes.com ranks each state by the average cost of auto insurance. The survey compares the median cost of auto insurance to the median household income for each state, and then shows the approximate percentage of each citizen’s income that is spent on car insurance. Here are the 5 most expensive and least expensive states to purchase insurance:
Most expensive states (as a percentage of income):
- Michigan: 8%
- Louisiana: 5%
- Kentucky: 4.55%
- West Virginia: 4.24%
- Mississippi: 4.05%
Least expensive states (as a percentage of income):
- Massachusetts: 1.43%
- North Carolina: 1.63%
- Hawaii: 1.63%
- Alaska: 1.75%
- Oregon: 1.95%
Reasons and Contributing Factors
While Michigan has the largest percentage of income going toward auto insurance, many experts argue that it is unfair to compare Michigan’s insurance to other states’ due to the offerings in each policy. Michigan is a no-fault state, meaning that each driver is covered by their own policy in the event of an accident, regardless of fault. Each policy also includes lifetime medical and rehabilitation benefits, neither of which are offered by any other states.
Unlike Michigan, Louisiana’s high insurance rates are not explained by fault laws and premium benefits. Instead, these high costs are associated with record high numbers of injury claims and costly lawsuits. On average, about 24% of accidents in the United States have injury claims. This amount is nearly doubled in Louisiana, where there are injury claims for around 43% of accidents. These high numbers drive up the cost of insurance for Louisianians.
Rates for Louisiana are also slightly skewed by the city of New Orleans. Residents of the city have a tendency for filing costly lawsuits, and many judges are notorious for ruling in favor of the plaintiffs. This causes rates for the city to be very high and, in turn, raise the average for the entire state.
Despite Massachusetts’ seemingly low insurance rates - only 1.43% of the average household income - this is actually very deceiving. The median income in Massachusetts is $20-30,000 higher than than the average of other states, so this is not a good indicating factor of the overall cost of insurance.
North Carolina, on the other hand, has an average median income as well as a very low percentage of income going towards insurance. The reason for this? It is a combination of the way the state’s population is dispersed along with the setup of the legal system.
North Carolina’s residents are spread out fairly evenly throughout the state rather than being concentrated in large metropolitan areas, resulting in fewer costly accidents and automobile crime. The legal system also looks down upon costly litigation resulting in response to auto accidents.
A base rate for insurance in established by the North Carolina Rate Bureau. Many insurance companies offer prices below this rate to remain competitive, but most companies will avoid charging higher rates.