The Key Factors that Affect your Auto Insurance Rates

If you are curious enough to compare auto insurance rates by zip code, you will probably find that they vary significantly, especially by state. The reason for these differences lies in the way insurance works. Insurance coverage is offered on the basis of risk. The more risky it is to provide someone with insurance, the higher their premiums will be. One of the best examples of this in the auto insurance industry is the age factor – younger drivers routinely pay higher car insurance premiums than older drivers because they are less experienced behind the wheel. There are a number of factors that affect the variation in auto insurance rates by zip code, including:
• Traffic Conditions
Not all cities have the same traffic conditions. Larger cities routinely have more drivers and experience more congestion on the roads, especially at peak driving hours. When you have more drivers navigating very busy roads, the chances for accidents get significantly higher. For instance, a city like Los Angeles will naturally report more traffic accidents in a day than Portland, Maine. And as a result, the risk to the insurer will be a lot higher in L.A. than it would be in Portland, meaning that you will undoubtedly get more advantageous rates if you live in the latter city.

• Car Crime
On a standard auto insurance policy, the customer is provided with coverage in case his car were to be stolen, vandalized, or broken into. Needless to say, some cities have much higher crime rates than others and insurers assume a larger risk in more crime-ridden towns. In terms of this factor, the variation in car insurance rates by ZIP code can be significant. Take, for instance, a very large city that includes multiple ZIP codes. Insurance rates will be much higher in the more dangerous parts of the city than they would be in the safer parts of town.

• Weather Conditions
Certain states are known for being prone to severe weather conditions such as tornadoes, hurricanes, and even earthquakes. And where there is the propensity toward devastating climate events, there is always the risk of utter destruction as far as your home and property are concerned. Any insurance company operating in a tornado alley state, for instance, would offer much higher premiums on auto insurance as a matter of course.

• Litigation Costs
This may sound like an odd one, but the variation in car insurance rates by zip code can be based in part on how much it costs to sue or be sued in your town. If you get sued for causing a car accident, your insurance company will have to pay the costs of litigation as well as the settlement amount. If litigations costs are typically high in your area, you can be sure that your insurance premiums will be high as well.
Keep in mind that your auto insurance rates are also affected by your age and driving record. To find out if you are paying a reasonable rate for your auto insurance, simply go online to compare insurance rates across zip codes. What you find out might surprise you!