Seven ways to lower your insurance in high-rate states
By Autumn Cafiero Giusti
If you live in New Jersey, Washington, D.C., or Louisiana, auto insurance premiums can eat up a sizeable chunk of your household budget.
That’s because it costs far more to insure your car in some parts of the country than it does in others.
In New Jersey, the state with the highest rates, the combined average price of insuring a vehicle was $1,334 in 2012, according to statistics compiled in 2014 by the National Association of Insurance Commissioners, Washington, D.C., is the second most expensive, with premiums costing $1,289, and Louisiana is third at $1,275.
The national average is $927.
The environment in which you operate your vehicle can play a large role in dictating your auto insurance costs, says Robert Passmore, senior director of personal lines policy for the Property Casualty Insurers Association of America, which is based in Chicago.
“If you live in an area where it costs more to fix a car or where medical costs are higher, then that’s going to be reflected in your auto insurance premiums, too,” he says.
Auto insurance also tends to be higher in states with high crime rates, more litigation over claims, fewer insured drivers and greater susceptibility to natural disasters.
“Insurance is regulated on a state-by-state basis, so the rates are set based on actual and anticipated losses in each given state,” says Michael Barry, vice president of media relations for the Insurance Information Institute, an industry-funded, not-for-profit consumer education group based in New York.
That’s not to say you can’t take away some of the sting of these expensive premiums. Even if you live in a state with high rates, auto insurance experts say that there are a number of steps consumers can take to lower their coverage costs.
Here are seven ways to lower auto insurance premiums in high-rate states:
1) Take on more of the risk yourself.
Although it’s not doable for everyone, consumers can generate more savings if they’re willing to pay more out of pocket in the event of an accident.
Raising your deductible to at least $1,000 can lower your premium by 10%
Barry suggests that those who have the means should raise their deductible to at least $1,000 and can lower their premiums by about 10% as a result. “You will safely see a double-digit percentage drop,” he says.
Drivers might also consider dropping collision coverage for older cars, especially vehicles that date back a decade or more and are worth less than $4,000 or $5,000. “If you get into anything more serious than a fender bender, you’re probably going to have to buy a new car anyway,” Barry says.
Taking on more risk can be a good cost-cutting measure, but only to a point. Marc Eagan, president and CEO of Eagan Insurance Agency in Metairie, La., cautions that you shouldn’t compromise your limits on protection — especially in a state like Louisiana, where there are several uninsured drivers on the road and more lawsuits. He advises at least getting liability coverage and insuring against uninsured motorists. “I would not just purchase the minimum requirement, either. If you can afford to buy a little more, by all means I would recommend you do that,” Eagan says.
The state of Michigan, which has the nation’s seventh-highest auto insurance rates follows a no-fault policy system. This means that motorists cannot sue over fault in auto accidents except in the event of a fatality or serious injury. A basic no-fault policy offers liability coverage up to a certain amount if someone is hurt or killed. But because it is possible that your liability costs could exceed those coverage amounts, many Michigan motorists buy extra liability insurance.
Opting for a bare-bones policy will cost less in the short term, but it might not be a good idea in the long run, says Todd Berg, attorney at Michigan Auto Law in Farmington Hills, Mich. “You can save money, but you are also sacrificing considerable protections. In the event of a tragedy, the savings you got might seem awfully unimportant,” he says.
2) Choose a make and model carefully.
The type of car you drive can make a difference in your premium, for better or worse. Insurance experts advise doing your homework and comparing rates on different makes and models before committing to buy. Sportier models and cars with higher horsepower typically cost more to insure because the cost to repair them can be much higher.
“Usually you’re going to pay a higher premium on physical damage for a sports car than on a four-door Camry,” Eagan says.
Thieves also target some types of cars more than others. Once again, something like a sports car could drive up costs. “People would rather steal that than a Honda Accord,” Eagan says.
Before committing to a new car note, Eagan suggests comparing rates on a few different types of vehicles to see if there’s an appreciable difference between one or the other. “That should factor into your buying decision,” he says.
3) Shop around.
Consumers who are willing to shop around can get a much better deal for themselves, even in high-priced states. And with the help of the Internet, consumers have more options than ever before, regardless of where they live.
“Even within a state, there are so many ways to shop for insurance now,” Barry says.
Auto insurance experts say that taking just a little extra time to get quotes from a few different carriers, as opposed to just going to a single insurance company, can pay dividends in the end. And consumers can go online to aggregate from multiple carriers at once.
4) Hunt for discounts.
Drivers can take advantage of a number of insurance discounts to help shrink an enormous premium. But consumers often fail to explore what’s available to them.
“People leave discounts on the table,” Barry says.
Low mileage discounts are available to individuals who drive fewer than a set number of miles each year. That’s a perk people might be able to receive if they retire or take a job closer to home.
Some insurers offer discounts for equipping your car with the latest security devices. There are also discounts for using seatbelts regularly, owning a car with antilock brakes or insuring multiple vehicles.
There are also affinity-marketing discounts available through some insurers. The way this works is the insurer partners with certain organizations – such as alumni associations and homeowner’s associations – and then offers discounts to any customers who belong to them.
Some drivers can receive a multi-policy discount if they buy their auto insurance and homeowner’s policies from the same company.
In Michigan, consumers can receive a discount on their premiums by coordinating their health care benefits with their auto insurance, says Berg of Michigan Auto Law. Having “coordinated benefits” means that in the event of an accident, your auto insurer would pay only for the portion of your lost wages and medical expenses that your disability or health insurance does not cover. “If you’re in an accident and you’re injured, your bills will go first to your health insurance to be paid. And only when you’ve done that, your auto insurance will kick in,” Berg says.
Because this type of policy entails less risk for the auto insurer, it costs less for the driver.
5) Maintain a clean driving record.
Driver safety factors heavily into insurance costs, and that’s even more the case in states with high accident rates.
Insurance experts say that taking care of your driving record is one of the most important things you can do to control your premium.
“Make sure you’re not excessively exceeding the speed limit. If you can avoid accidents and tickets, that’s the No. 1 thing you can take control of,” says Passmore of PCIAA.
John Bowman, communications director for the National Motorists Association in Madison, Wis., says that the more types of citations and infractions that show up on your record, the higher your rates are going to be.
One big mistake, he says, it not fighting every traffic ticket that you get. “Paying a traffic ticket is essentially the same thing as admitting guilt, and that will show up as a conviction on your driving record,” he says.
And if you think you’re too busy to contest a ticket, Bowman says to consider what it might cost you if you don’t. “Some people say they don’t have time for that, but they’re very surprised six months later when their insurance rates go through the roof. They didn’t really think about the consequences of the speeding ticket,” he says.
Bowman also suggests that drivers monitor their driving record from time to time, and that they can order it online through their state DMV. “You might be surprised what you find on there,” he says.
6) Raise responsible teens
It’s hard enough to live somewhere with expensive auto insurance, but trying to insure a teenager on top of that can kick your rates into overdrive.
Teenagers can be the costliest drivers to cover because insurers view them as the riskiest group on the road. In Louisiana, drivers between the ages of 18 to 25 can cost as much as $3,000 a year to insure.
But there are steps young people can take to cut those costs.
Teenagers can lower their rates by completing a driver’s education course, and they can also receive a good student discount if they can maintain a B average.
“Even if it’s a 10% discount, that’s still a good number,” Eagan says.
7) Live in a less populated area
Even though a state might have pricey auto insurance, it’s likely that some areas are going to be less expensive than others.
Urban areas and densely populated suburbs typically command higher rates than rural areas and communities that are more sparsely populated. Living on the outskirts of a city could allow you to stay in the same metro area but sill pay less than your peers on auto insurance.
“For people who live in urban areas with more cars and more people, there’s just going to be more accidents. And that’s going to be a pretty big driver,” Passmore of the PCIAA says.
A driver who owns a car in upstate New York, for example, can expect to pay considerably less than they would if that person lived in Manhattan.
“You don’t have to go very far from New York City to find substantially lower rates,” Barry says.
In Louisiana, the two biggest parishes in the New Orleans metro area – Orleans and Jefferson – command some of the area’s highest premiums. However in some of the less populated suburbs and rural communities that are 30 to 45 minutes outside of the city, consumers can receive at least slightly lower rates, says Eagan, whose office is just outside of New Orleans.
The reason, he says, is because these tend to be areas with less traffic congestion, crime and litigation on claims.
“As we move into the rural areas, we see premiums decrease,” he says.
Ten Most Expensive States for Auto Insurance
(ranked according to combined average premium in 2012)
1. New Jersey $1,334.54
2. District of Columbia $1,289.49
3. Louisiana $1,275.10
4. New York $1,273.27
5. Florida $1,196.02
6. Rhode Island $1,176.01
7. Michigan $1,171.94
8. Delaware $1,153.59
9. Connecticut $1,082.05
10. Maryland $1,056.71
Source: National Association of Insurance Commissioners