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Car Insurance Premiums: Why Do Zip Codes Affect Costs

January 27, 2012

There are a wide range of factors which influence your car insurance premiums. and one of those factors is your zip code. Depending on where you live, the population density (among other factors) can put your vehicle more at risk and therefore make it more expensive to insure. In urban areas, for instance, auto theft is more of a concern so anyone who is in a high theft area and wants to insure their vehicle against theft can expect to pay more for auto insurance. The following are a few of the factors which vary by zip code and can affect your auto insurance rates.

Risk of Theft or Vandalism

As previously mentioned, theft tends to be more abundant in urban areas. If you live in a large city where auto theft is relatively common, it will cost you more to insure your vehicle against theft. The same goes for vandalism: if you live in an area where graffiti is abundant, your car is more likely to be "tagged" and so you'll have to pay more if you want your car insured for vandalism. The higher the risk, the higher you can expect your car insurance premiums to be.

Population Density

It makes sense that the more people driving around the area where you live, the more likely you are to get in an accident when driving your car in that area. If you live in a high population area where the traffic is dense and near constant, there is far more danger than if you live out in the country where very few cars are passing by at any given time. So, the more drivers exist in your zip code, the more money you will likely pay for most types of insurance.

Natural Disasters

If you live in an area which is known for flooding, tornadoes or something of that sort, comprehensive insurance or any other type of insurance which covers natural disasters is going to cost more. Higher rates go hand in hand with higher risk, so a high risk area is also going to have more expensive insurance coverage.

Other Studies

Studies performed in certain areas and cities have shown that some areas have a higher risk of certain dangerous things, such as running red lights, than other places. For instance, studies around the country have shown that Phoenix, Arizona has the highest percentage of fatalities as a result of running red lights. If your zip code has been shown by studies to have a higher percentage of people who drive dangerously, you will likely need to pay more for car insurance.

Your zip code affects the cost of your auto insurance premiums because of many factors that vary by zip code, as explained above. Population density, risk of theft or vandalism, risk of natural disasters or various studies performed can all make insuring your vehicle more risky for the insurance provider, thus driving up the costs of premiums.

Related Questions and Answers

Which Zip Codes on Average Have the Highest Car Insurance Rates?

Average car insurance rates are normally broken down by state. The following states had the highest rates for the year 2010. There are a number of reasons these states have higher rates. Many of them are legal reasons. Louisiana, which has the highest insurance costs in the country, only allows a jury trial for claims over $50,000, which pushes up settlement values and that expense is passed on to customers. Michigan is number two, followed by Oklahoma, Montana and California. Michigan offers unlimited medical benefits for life which pushes up the cost of policies there. In addition, crime rates, and median income figures in your zip code will affect your rates.

Will a Higher Age Give Me a Lower Auto Insurance Premium?

As you get older, lower auto insurance premiums are one of the benefits you will enjoy. This only lasts for awhile, and only if you keep your driving record and credit score clean. Insurance premiums drop dramatically when you turn 25. They will stay fairly low until around age 60 when they will start creeping up again. They will continue to climb until death or a person is no longer able to drive. These premiums are based on studies that show young, inexperienced drivers are responsible for the majority of accidents. As we get older and reflexes slow down, accident rates start to climb, as do insurance premiums.

insurance rates by zip code

Article Source: http://www.carsdirect.com/car-insurance/car-insurance-premiums-why-do-zip-codes-affect-costs

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