How Does Vehicle Location Impact Car Insurance Premiums?
Auto insurance companies use statisticians and actuaries to determine the rates that need to be charged on vehicles based upon predicted loss costs. One of the variables in their model is the location of your vehicle – not only where it is stored when not in use, but also where it is driven. These two location factors can have a significant impact on the pricing of your various automobile coverages.
This article will address some of the coverages that can be impacted by vehicle location and some of the main reason why. Some of the variables are within your control.
Liability Coverage: The liability risk of driving can vary based upon a number of factors.
- Congestion: In general, the more congested an area is (the more traffic there is) the higher the odds are of an accident with a vehicle or a pedestrian. Driving in New Jersey is riskier than driving in the countryside. Normally, congested areas will have higher premiums due to the higher chances of loss.
- Legal Venue: In certain areas, judges tend to be more plaintiff friendly and juries tend to give higher awards. In such areas, auto liability rates will be higher. (Click here for a listing of “judicial hellholes.”)
- Theories Of Negligence: Certain jurisdictions have statutes or precedents where you could be as little as 1 % at fault in an accident and still be responsible for all of the damages. There are other venues where a plaintiff who is a small percentage at fault may be barred from recovering from you for their damages. These theories of negligence impact your exposure to loss and can make a big difference in your insurance premiums.
- Weather: Places with a lot of ice, snow, rain, or fog are likely to have higher accident rates. Interestingly, according to a 2008 study by the NHTSA, “glare” is a critical contributing factor in 16% of accidents. If you are out driving on a sunny day, put on some stylish shades.
While accident rates tend to be higher in congested, metropolitan areas, drivers are generally driving at a lower rate of speed when those accidents occur. Death rates are often higher in rural areas, where drivers may travel at a higher rates of speed and on roads that may be gravel or twisting and turning. Click here for a table of death rates per 100,000 of population published by the IIHS.
- Theft: The risk of theft of your vehicle varies tremendously based upon where you are at. According to FBI statistics from 2013, on average across the nation, one in 351 vehicles are stolen each year. The worst metropolitan area in the country for 2012 was Bakersfield, California, where 1 in 138 vehicles were stolen. In areas with high theft, your comprehensive premium will be higher.
- Vandalism: Much like theft, vandalism varies tremendously based upon where you park your vehicle. Certain towns are much worse than others. In general, the risk varies similarly to crime risk. In areas prone to higher vandalism incident rates, your comprehensive premium will be higher.
- Street vs. Garage Parking: Some insurance companies provide a substantial credit for vehicles that are parked in garages or secure facilities vs. on the street. If you live in a high crime area, and have access to secure parking: a) take advantage of that secure parking; b) make sure your insurance agent knows about the secure parking so she can try to get you a discount.
- Vehicle Alarms: Similarly, if you live in a high crime area, you may wish to consider having an alarm or vehicle tracking device installed in your auto. These devices act as a deterrent to theft and make it more likely that you will recover your vehicle when it is stolen. Many insurers offer significant discounts for such devices. If you have such a device, make sure your insurance agent knows about it so he can get you a discount.
- Hail/Flooding: Hail and flooding can cause significant damage to vehicles. If you live in an area with high incidence of hail or heavy storms, this could drive up the premiums for comprehensive coverage.
- Weather: Places with a lot of ice, snow, rain, or fog are likely to have higher accident rates. More collisions leads to higher collision premiums.
- Congestion: In general, the more congested an area is, the higher the odds are of an accident. Driving in the city is riskier than driving in the countryside. Normally, congested areas will have higher premiums due to the higher chances of loss
Some states have statutes called “No-Fault” laws that were usually enacted with the intention of reducing the amount of litigation that occurs around auto accidents. In states with some form of No-Fault, you often can only sue another party for damages when your damages exceed a specific threshold or when certain qualitative thresholds written into the statute have been met (loss of a limb, permanent disability, etc.). If your damages are less than the specified threshold, then you collect those damages from your own insurance policy. By enacting such laws, legislators hope that the courts will be reserved for losses involving more serious losses.
In states with generous no-fault statutes, like Michigan, the cost of your no-fault premium may be higher. Some states allow stacking of no-fault benefits (where your limit of coverage may be the limit per vehicle times the number of vehicles you have insured). If you are in such a state, you may be able to decrease your no-fault insurance premiums by signing a form your agent can provide wherein you reject the ability to stack the limits.
Uninsured/Underinsured Motorist Coverage:
Similar to your liability insurance premium, the cost of Uninsured and Underinsured Motorist Coverage will vary based upon traffic congestion, legal venue, theories of negligence, and the weather where you have your car.
Additionally, the degree to which other drivers are uninsured can impact your premiums. Some states do not have very aggressive insurance purchasing enforcement. According to the Insurance Research Council, Oklahoma leads the nation with the highest percentage of uninsured drivers, at 25.9%. In some cities, the percentage of uninsured drivers can be substantially higher than that, with the percentage of uninsured drivers in some of the worst cities estimated to be as high as 40%.
Similar to no-fault, some states allow “stacking” on uninsured and underinsured motorist coverage. If you are in such a state, you may be able to decrease your uninsured/underinsured motorist premiums by signing a form your agent can provide wherein you reject the ability to stack the limits.
Where you garage your vehicle can have a significant impact on your premiums. If your vehicles are garaged in multiple places, make sure you discuss the particulars with your agent. If you happen to be in a high crime area, parking in secure off-street locations and installing vehicle alarms may help to reduce your premiums.
Talk to your professional insurance agent about all of the automobile insurance discounts that you may qualify for. Discuss the particulars of your situation so that your agent can make sure you have the right coverages and can advise you on your options. An independent insurance agent will represent numerous insurance companies and can shop around to help find the best insurance company for your needs.
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Enhanced Insurance is not written by attorneys. If you’re looking for legal advice, you need to contact a lawyer. Further, insurance practices and forms change constantly and are varied from state to state. For definitive answers in your area, contact a local agent.
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