Why are Insurance Costs Higher in Some ZIP Codes?

FREE Car Insurance Comparison

Secured with SHA-256 Encryption

Rachel Bodine graduated from college with a BA in English. She works as an associate editor and writer for 4autoinsurancequote.com for over a year and enjoys creating content that offers expert advice on car insurance topics.

Full Bio →

Written by

Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs...

Full Bio →

Reviewed byLeslie Kasperowicz
Former Farmers Insurance CSRhttps://res.cloudinary.com/quotellc/image/upload/insurance-site-images/4autoins-live/6ea5d860-leslie-kasperowicz.jpg

UPDATED: Mar 26, 2020

Advertiser Disclosure

It’s all about you. We want to help you make the right coverage choices.

Advertiser Disclosure: We strive to help you make confident insurance decisions. Comparison shopping should be easy. We partner with top insurance providers. This doesn't influence our content. Our opinions are our own.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.

Car insurance is one of the necessary evils of our society; no one really likes paying for it, but when you need to use it having car insurance can end up saving a small fortune in legal expenses, damage claims, and medical treatment costs. However, many drivers tend to compare their insurance costs with friends and family and become confused with why the rates are so different – even when you’re looking at two individuals who just live a couple of miles away from one another.

In this article, we will take a look at why insurance costs are higher in some ZIP codes, and try to shed some light on how insurance companies actually work to ensure that they offer a competitive price for everyone by mitigating the risk that some of their drivers bring to the table.

Collision and Accident Rates

US zip codes

Different areas of the United States have different ZIP codes. Different ZIP codes have different auto insurance rates. How are these determined and what does this mean to you?

The first – and probably most obvious – scenario responsible for raising car insurance rates in certain ZIP codes is the collision and accident rates in the area. Auto insurance companies have access to a ton of data on collisions, and they are easily able to calculate their areas of higher and lower risk right down to individual street corners in cities large and small. If you live or are likely to drive through an area that has a high accident risk, you can be sure that your car insurance company knows about it, and that they are going to charge you accordingly to mitigate the risk of an expensive payout.

Enter your zip code below to view companies that have cheap auto insurance rates.

 Secured with SHA-256 Encryption

Auto Theft and Vandalism Rates

The other main driver of upward pressure on car insurance costs in certain ZIP codes is the risk of auto theft or vandalism. As you can likely well imagine, there are areas of the country that are far more prone to auto theft than others. Large port cities, where cars can be “chopped”, have their identification numbers and tags removed, and put onto ships destined for foreign countries have far higher car theft rates than cities that are landlocked and have smaller populations where everyone tends to know one another.

Larger cities also tend to have more instances of vandalism that smaller ones. While riots and outright civil unrest is rare anywhere in the country, minor vandalism ranging from smashed windshields and headlights to keys run over the paint happens on a second by second basis in cities across the map. If these items have to be taken care of on a regular basis by auto insurance companies, they will most certainly raise the insurance rates in that area.

Local Costs to the Insurance Company

Insurance companies must deal with a number of local cost factors, all of which they are apt to pass down to their policyholders in an effort to keep their overall costs down. Some cities and states charge a variety of taxes to insurers, which drives up the cost for everyone and must be split among the customer base. Many times, there are random local risk factors that are in play as well. Did you know that there are certain areas of your city and state that – for no documented reason – simply have higher instances of running red lights, speeding, drunk driving, and other infractions? Insurance companies know this, and they raise the rates of drivers residing in those ZIP codes because of it.

Other Miscellaneous Factors

There are a number of miscellaneous factors that can cause insurance costs to be higher in some ZIP codes over others. The risk of natural disasters such as tornadoes, floods, and earthquakes can greatly increase the amount of money that auto insurance companies must pay out to policyholders on an annual basis. If you live in tornado alley – expect that your insurance costs will be higher than someone who lives in a more calm part of the Midwest.

Your commute distance can also affect your insurance rates, so it might be worth looking at these U.S. cities with short commutes.

Enter your zip code below to view companies that have cheap auto insurance rates.

 Secured with SHA-256 Encryption

Talk to your Insurance Company Before you Move

Finally, it’s a very good idea to give a quick call to your auto insurance company before you move to determine how much your car insurance is going to cost in your new city or suburb. While you might think that there’s little you can do about any increases in your car insurance – that’s not entirely accurate. Any time your insurer is going to raise your rates is an excellent time to take a look at the other insurance companies in your local market to see what they offer and what kind of deals you can score for transferring over. Don’t become tied to any one insurance company – if they’re starting to charge you too much for your insurance, it’s time to move on.

4AutoInsuranceQuote.com exists to help users like yourself navigate the difficult auto insurance waters to ensure that you come away with the best deal possible for your insurance. To get started with finding the best possible auto insurance rates in your area, scroll up to the top of this page and enter your zip code in the form. It’s that easy!

Are you looking for free insurance quotes?

Your one-stop online Car Insurance guide. Get a Free Quote Now!

(855) 898-5028