Why are insurance costs higher in some ZIP codes?

Why are insurance costs higher in some ZIP codes? Auto insurance costs by ZIP code vary greatly due to high crime rates and traffic statistics that make it riskier for auto insurance companies to insure you. For example, rates in Michigan's 48201 cost on average $2,529/mo. but rates in Michigan's 48880 average $660/mo. Most other states are far lower.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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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. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years

UPDATED: Apr 12, 2021

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What You Should Know

  • Auto insurance rates vary wildly by ZIP code in some areas and certainly by state
  • Crime rate affects auto insurance rates. Areas with high crime rates typically pay more for auto insurance.
  • Location isn’t the only factor for your rates. Your driving record, credit history, and commute length are also important.

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 expensesdamage claims history, and medical treatment costs. However, rates can differ between two people even when they live only a couple of miles away.

What is an insurance ZIP code, and why does it matter? Auto insurance costs by ZIP code can be very different because of other factors like theft and vandalism rates which vary. And if you get full coverage versus liability coverage only, you’ll see a big difference in your prices.

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

Compare car insurance rates now for your area by using our FREE tool. Before learning why annual premiums for insurance are higher in some ZIP codes, enter your ZIP code above and get quotes from multiple insurers.

Are car insurance rates based on ZIP code?

Auto insurance rates are based on many factors. If you get personal liability insurance only versus also having collision and comprehensive, there’s a change in your rates. Other factors include your credit score, driving history, and yes— your location.

Does ZIP code affect car insurance? Insurance companies base your rates upon a variety of factors. These include your driving record, credit history, and commute length. But they also look at your location.

Some of this is due to the crime rate which affect auto insurance rates. If there’s a higher rate of theft and vandalism, that will spike your rates in your ZIP code.

Insurers review your insurance by ZIP code to see how much your rates should be. There’s a big difference sometimes. For example, the cheapest rates in California are in 93401 at an average $2,731/ year compared to 90210 which averages $6,324.83/ year. That’s more than twice as much within the same state.

Auto Insurance Rates by State

Just like with ZIP code, your rates vary by state. But by state it can vary even more. The most expensive rates in the country are in Detroit, where you might expect to pay over $30,350.09/ year compared to Iowa which averages $672.01/ year. Those aren’t typos.

The table below shows the average annual rates for car insurance for each state. You can see just how that amount varies state-to-state by these rates from the National Association of Insurance Commissioners.

Average Annual Auto Insurance Rates for Full Coverage by State
STATEAverage Annual Auto Insurance Rates
Alabama$817.95
Alaska$1,048.60
Arizona$932.10
Arkansas$869.37
California$926.79
Colorado$898.79
Connecticut$1,108.67
Delaware$1,186.33
District of Columbia$1,307.62
Florida$1,206.46
Georgia$964.70
Hawaii$856.33
Idaho$656.95
Illinois$833.44
Indiana$724.65
Iowa$672.01
Kansas$819.14
Kentucky$904.39
Louisiana$1,326.78
Maine$679.56
Maryland$1,077.97
Massachusetts$1,075.35
Michigan$1,252.27
Minnesota$826.64
Mississippi$935.08
Missouri$825.40
Montana$842.54
Nebraska$778.81
Nevada$1,057.63
New Hampshire$777.98
New Jersey$1,353.96
New Mexico$896.58
New York$1,300.09
North Carolina$745.17
North Dakota$737.63
Ohio$741.11
Oklahoma$941.34
Oregon$855.57
Pennsylvania$934.34
Rhode Island$1,219.29
South Carolina$910.51
South Dakota$717.73
Tennessee$823.74
Texas$1,025.64
Utah$832.24
Vermont$737.67
Virginia$807.71
Washington$923.16
West Virginia$1,015.57
Wisconsin$696.11
Wyoming$816.71
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What are the states with the cheapest car insurance? These are typically rural states with lower crime rates.

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Why do collisions & accidents increase auto insurance rates?

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.

Why do auto theft & vandalism increase auto insurance 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.

What are local costs to auto insurance companies?

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.

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What are some other miscellaneous factors that impact auto insurance rates?

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.

Why should you talk to your auto 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 the cost of auto insurance 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.

Now that you’ve learned about auto insurance costs by ZIP code, 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. You’ll get FREE quotes from multiple insurers.

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Hopefully, we have answered all your questions about affordable auto insurance in your area and how ZIP codes affect insurance rates. Just in case, though, check out some common questions below.

#1 – Is car insurance cheaper in NY or CT?

The average annual auto insurance price in Connecticut is $1,108.67/ year, while the rates in New York are $1,300.09/ yes. Though it changes drastically by ZIP code within the states, Connecticut is overall cheaper than New York.

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#2 – What is the cheapest ZIP code for auto insurance in California?

The Cheapest ZIP code in California is 93401, which includes the cities of Edna, San Luis Obispo, and Avila Beach. Annual rates in that ZIP code are $2,731.32/ year. For comparison, the highest rates are, unsurprisingly, Beverly Hills 90210. If you live there, you can expect to pay $6,324.83/ year.

Part of that is the crime rate. Beverly Hills has one of the highest crime rates in the country and is less safe than 97 percent of US cities. Neighborhood Scout reports that Beverly Hills has a crime rate of 54.65 per 1,000 residents, with a violent crime rate of 3.10 per 1,000 residents.

#3 – What are car insurance rates by ZIP code in Michigan?

Auto insurance reviews rates by ZIP code, among other factors. What about Michigan, home to Detroit? Michigan auto insurance rates are easily the highest of any state in the country.

Detroit’s ZIP 48201 has very high rates, with auto insurance costing on average $30,350.09/ year.

Even the lowest rates in Michigan are higher than anything in most other states. The cheapest ZIP code for auto insurance in Michigan is 48880 in St. Louis, with rates around $7,916.29/ year.

#4 – What city has the highest car insurance rate?

The highest car insurance rates by city are similar to the FAQ above. The city with the highest auto insurance rates is easily Detroit which can cost around $30,350.09/ year. 

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#5 – What state has the cheapest car insurance rates?

The cheapest rates tend to be for rural states. The best average rates can typically be found in Iowa, at around $672.01/ year.

#6 – Do the cost of homeowners insurance premiums vary by ZIP code?

Just like auto insuranceaverage homeowners insurance rates also vary base on the ZIP code for your dwelling. This homeowner rates variation is similar to the trend in theft and vandalism that spikes auto insurance, but also more expensive neighborhoods can have a higher cost of homeowners insurance rates since the house can just cost more to repair.

The good news is, however, that you can get a variety of homeowners coverages and homeowners insurance discounts on your homeowners insurance cost.

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.

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