Many motorists notice significant changes in their auto insurance premiums when they move, especially towards the city centers or outwards. The address is very important because people usually drive around their neighborhood and vehicles are kept there most of the time. So, higher auto crimes, congested roads, vandalism and weather conditions in a zip code are taken into account when insurers price risks.
There are a few factors that determine the amount of vehicle insurance premium you are going to pay. The first one has everything to do with your driving habits which tell what kind of a driver you are. Mostly safer drivers are given better offers by their insurers thereby reducing the premium. The type of car you drive plays an important role as well. Safer and hard to steal automobiles attract lower charges. They are well protected against theft and they protect the people they carry in accidents a lot better.
Direct Effects of your Address
Another aspect considered by auto insurers is your personal circumstances. Within this they look at your zip code. This tells them how safe your neighborhood is, does car theft occur quite often and are there many vandals in the area. They also look at the traffic congestion within the vicinity of your home before they can offer you a quote. Much of this information is readily available as statistical data. And companies compile their own numbers and prepare risk charts for each region.
Just living within a certain high risk zone like city centers and rough neighborhoods will affect the rates charged to you directly. Only a few miles down the road you can be charged as much as thirty percent lower. This difference is especially noticeable as you move out of the city centers towards the suburbs and countryside.
For example, private parking spaces are limited in the cities and cars are left out on the streets, where there is a fair bit of traffic day and night. On the other hand, people usually have driveways in suburbs and many houses have garages as well. There are several other points like this and they make a large difference when they are added up.
Indirect Effects of Zip Codes
Furthermore, each state has its own auto insurance laws and regulations that affect the way policies and the minimum liability coverage have to be bought. For companies it could be extra burdensome to do business in certain states due to the highly controlling attitude of regulators. The limits set by your state may make you pay more for coverage too.
A step further influence of the state you live in can be seen with the way car insurance rates are set. The state insurance commissioner has to approve the rates charts prepared by companies. This does not mean that the commissioner can tell companies how much they can charge for each policy. This point is always misunderstood. What they can do is to control overcharging to a point and make sure that everyone is treated fairly. Other than that, each company is free to determine what premium they like for the types of risks insured.
Competition in your State
All these internal factors within an area will affect the rates charged to you. Also, it will either make it an attractive place to do business or some companies will stay away from the whole state. This does happen and some companies just do not sell policies in certain states.
The more companies selling policies in your area the better for you. The resultant increased competition will drag the premiums down in theory. When there are so many alternatives available customers compare auto insurance quotes. If the area is generally low risk in terms of car accidents, theft, vandalism and natural damages (storm, flood, etc.) companies would like to take a larger share in the market. As a result, they work harder to gain new customers compared to other states.