Does Crime Rate Affect Auto Insurance Rates?

Many people are surprised to discover that crime rate can significantly impact auto insurance premiums.

It’s true: your ZIP code’s crime rate can raise or lower auto insurance premiums. Depending on your ZIP code, this difference can be significant.

Today, we’re explaining everything you need to know about how crime rate can impact auto insurance premiums.

Does Crime Rate Affect Auto Insurance Rates?

Yes, Crime Rate Impacts Auto Insurance Premiums

Insurance companies use hundreds of different factors to calculate your risk as a policyholder. Based on these hundreds of factors, insurance companies will attempt to answer a simple question: what are the chances that you will make an insurance claim in the future?

Insurance companies use your driving record to answer this question. Someone who has three DUIs and four at-fault accidents in the past seven years, for example, is a riskier driver to insure than someone with one speeding ticket.

Insurance companies will also use your demographic data. An 18-year old male, for example, is a riskier driver to insure than a 45-year old female, all things being equal.

In addition to using demographic data and driving history, however, insurance companies consider various features of your location – including crime rate.

There’s a reason you input your address and ZIP code into a car insurance quote request form. Your address and ZIP code play a crucial role in insurance premiums. Certain addresses and ZIP codes are associated with higher insurance premiums.

Your ZIP code may have high rates of crime-related car insurance claims, including:

All of these factors impact insurance premiums. Insurance companies want to limit the number of claims they pay out as much as possible. If you live in an area where the crimes above are more likely to occur, then insurance companies are more likely to have to pay.

How Your ZIP Code Impacts Car Insurance Premiums

All of the following factors can impact car insurance premiums. Based on your ZIP code, you may higher or lower premiums than an identical driver in a separate ZIP code.

Crime Rate

Yes, crime rate significantly impacts car insurance premiums. Insurance companies will look at the rates of break-ins, vandalism, car theft, and other vehicle-related crimes in a particular ZIP code.

Is the ZIP code associated with higher-than-average vehicle crime? Do drivers in that ZIP code have higher claims rates than drivers in other ZIP codes? The more crime in an area, the higher your rates will be.

Population Density

Drivers in big cities tend to pay higher insurance premiums than drivers in rural areas. When there are more people and vehicles around, there are more chances for an accident or claim. Accident rates are higher in cities than in rural areas simply because there are more people.

Weather

Certain ZIP codes have worse weather than other ZIP codes. Your ZIP code may have bad winter driving for 3 to 4 months of the year, for example, which means you’ll pay less than a driver who lives in a ZIP code with sunny year-round weather. Drivers in flood-prone or storm-prone ZIP codes will also pay higher insurance premiums.

Local Road Maintenance

Surprisingly, insurance companies may even look at the quality of roads in your ZIP code to determine the likelihood of handling a claim. ZIP codes with poorly-maintained roads and many potholes may have higher accident rates than ZIP codes with perfect roads.

Can I Insure My Car to a Different ZIP Code to Save Money?

Let’s say you’ve just moved out of your parents’ house into a condo downtown. Your parents still live in the safer, more remote suburbs. Your insurance rates have risen because your downtown ZIP code is more densely populated and has higher vehicle break-in rates. When you apply for car insurance, you notice your premiums have doubled.

In this situation, you might be tempted to insure your car under your parents’ address. You spend a couple days a week there, so why wouldn’t you take advantage of their safer ZIP code?

Unfortunately, this is considered insurance fraud. Your vehicle’s insurance documentation needs to list the address where your vehicle is parked most nights of the week.

If you try to use a different ZIP code, then you will face issues when making an insurance claim. Let’s say someone breaks into your car downtown and steals it. You make an insurance claim. Your insurance company denies your claim because their investigation reveals your car was parked at the downtown address 25 days a month. Your $20,000 claim on the total loss of your vehicle is denied, and you no longer have a vehicle.

Final Word

Yes, your ZIP code can significantly impact insurance premiums. Various characteristics of your ZIP code – including crime rate – can raise or lower insurance premiums.

Drivers who park their car in a ZIP code with high rates of crime, break-ins, and vandalism will generally pay higher insurance premiums than drivers who park their car in a safer ZIP code.

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