Auto insurance rates are constantly rising, and in some states it can be $2,500 or more annually.
Auto insurance is required in every state (except one), but the costs can vary widely. Auto insurance is usually a big line item on household budgets, and can particularly impact younger or lower-income drivers.
In this article, I’ll identify the top 10 cheapest states for auto insurance, what factors drive the rates and show how you can use this information to save money. I’ll outline each state’s average annual premium, compare rates with the most expensive states and offer tips for getting lower rates. Using data from several well-known sites, I was able to compile the list of cheapest states based on the annual premium paid. Data was compiled from Insure.com, Forbes and Bankrate.com.
Maine
Maine is often cited as the cheapest state for car insurance, with an average annual premium of $1,175. Why is Maine so cheap? First, it has low population density which means there are less people on the road and less chances of accidents. The state also has low accident fatalities, meaning lower claims for insurance companies. They also have one of the lowest rates of uninsured motorists, estimated to be 5.3%. Other factors include its “at-fault” regulations, lower cost of repairs and lower incidents of insurance fraud.
New Hampshire
New Hampshire is one of the cheapest states with an average annual premium of $1,265. The primary factor impacting the low rate is the fact that New Hampshire is the only state that doesn’t require insurance. As a result, insurance companies are competing for a smaller pool of customers, so they keep the rates competitive. Additionally, the state has a culture of safe driving, resulting in a smaller number of insurance claims.
Vermont
Vermont’s average annual premium is $1,319. Vermont has a very rural landscape, with few major urban centers which means less cars on the road and less accidents. Low numbers of uninsured drivers and low crime rates also contribute to the state’s low rates. It also has a favorable legal environment, with its “at-fault” regulation and lower than average minimum required insurance.
Ohio
Ohio’s average annual premium is $1,417. Ohio has mild weather and little instances of major natural disasters, meaning the likelihood of large-scale claims is low. The state also has a high number of insurance companies, meaning there’s competition which drives prices down. Low healthcare insurance premiums means insurance companies pay lower than average medical claims. Fewer accidents and moderate traffic density also contribute to lower rates.
Idaho
Idaho’s average annual premium is $1,428. Idaho is one of the least densely populated states, which results in lower traffic congestion and drivers on the road. In addition, the state boasts a low crime rate and number of car thefts. Other factors include low rate of fatal accidents, high quality road infrastructure, fewer uninsured drivers, and a competitive insurance market.
Virginia
Virginia’s average annual premium is $1,469. The overall population density is lower than average, resulting in fewer cars on the road and less accidents. There is strong competition among insurance companies and low auto theft rates. The state also has lower than average traffic fatalities which contributes to lower insurance rates.
Indiana
Indiana’s average annual premium is $1,515. There are several factors keeping rates down. The state is very rural, so there are less cars on the road. The state’s required minimum insurance is moderate compared to other states. Insurance companies are allowed to use credit scores to determine premiums, so those with good scores get lower rates. There’s also a very competitive insurance market, and low cost of living and repair costs.
Hawaii
Hawaii’s average premium is $1,517. Hawaii regulations are favorable to lower insurance rates including a modified “no-fault” system and thresholds on lawsuits. Because the state is small and isolated from the mainland, there are fewer miles driven and less cars on the road, reducing accident risk. There are also fewer serious bodily harm injuries than average.
Illinois
Illinois’ average premium is $1,532. Illinois has a low fatal accident rate, contributing to its lower rates. Outside of Chicago, the rest of the state is somewhat sparse, meaning lower population density. In addition, Illinois also has a competitive marketplace, with many companies competing for customers.
Washington
Washington’s average annual premium is $1,608. Washington doesn’t have a “no-fault” system, which lowers premiums. In addition, credit history can be used to set premiums, so those with good credit can get lower rates. Another factor driving down costs is a low risk of major natural disasters.
Most Expensive States
By contrast, here are a few of the most expensive states for auto insurance.
<1> Louisiana: $3,718 annual premium. Factors include frequent natural disasters, high repair and replacement costs, high number of uninsured drivers, high accident rates, large number of lawsuits and high accident rates.
<2> Florida: $3,536 annual premium. Factors include high vehicle thefts, high number of natural disasters, high accident rates, high rate of fraud, large number of uninsured drivers and densely populated areas.
<3> New York: $2,898 annual premium. Factors include densely populated urban areas, heavy traffic on the roads, high healthcare costs, higher rate of insurance fraud, and high litigation costs.
<4> Michigan: $2,859 annual premium. Factors include its unique no-fault system requiring unlimited Personal Injury Protection, meaning insurance companies must cover all medical costs. Other factors are harsh winter conditions and deteriorating roads resulting in more accidents, and a high number of uninsured drivers.
<5> California: $2,848 annual premium. Factors include densely populated areas, high repair costs, wildfire risks, high number of uninsured drivers, and recent rate increases for no-fault insurance.
Factors Impacting Auto Insurance Rates
Why is there such a difference in insurance rates across states? There are many factors that impact how cheap or expensive auto insurance is and the rates can vary widely.
Legal and Regulatory Environment
The auto insurance regulations in any state have a significant impact on the cost. First, the minimum required insurance dictates what coverage a driver must have and how much. In addition, the type of liability can impact costs. “No-fault” states tend to be more expensive than “at-fault” states. Finally, the way lawsuits are handled makes a difference. Some states have more favorable litigation regulations than others.
Demographics and Environment
Population density affects rates as the more densely populated states have more congestion on the roads and more traffic, which increases the number of accidents, and drives up insurance rates. Similarly, the amount of urban vs. rural areas has an effect, The more rural areas tend to have less accidents which decreases insurance rates. More natural disasters in a state means more claims and that drives rates up. And the lower the crime and vehicle theft rates, the lower the insurance rates.
Market Factors
The more insurance companies in each market, the higher the competition which means lower costs for insurance coverage. In addition, the claim frequency rate and overall severity of claims impacts insurance rates. More claims and more severe claims mean higher costs. The higher the cost of car repairs and medical costs results in higher premiums.
Driver Behavior
The higher the number of uninsured drivers, the higher the auto premiums will be. More insurance fraud can mean higher costs. And the overall driver profile in a state has an impact. This includes age, driving behavior, and driving history.
How To Use This Information To Save
You can use the information about cheapest and most expensive states to help you save money on your premiums. If you are moving, consider the costs of auto insurance as a factor, as it is usually a big part of your personal budget. If you are in a higher cost state, there are several things you can do to reduce your costs:
<1> Shop around among insurers.
<2> Bundle policies (home + auto).
<3>Increase deductibles when feasible.
<4> Maintain a clean driving record.
<5> Drive safer (no accidents) and fewer miles.
<6> Take advantage of discounts (safety features, vehicle usage, etc.).
<7> Possibly consider having the state minimum or lower coverage
The world of auto insurance can be confusing and complicated. Location matters as rates vary between states and even in different parts of a state (rural vs. urban). You have many choices of coverage, some of which are dictated by the state laws. And it’s important to balance the cost with having adequate insurance. Make sure to shop around with different insurance companies to get the best rate and take steps to reduce your premium. Auto insurance doesn’t have to be a burden. With smart choices and awareness, you can get the optimal savings.
FAQ
Why is there such a difference in price between states?
There are many factors that affect the overall costs of auto insurance in each state. Things like the legal environment, demographics, driving behaviors and market competition all impact the insurance rates.
What should I do if I live in a high-cost state?
There are a few things you can do to try and reduce your insurance premium including shopping around, increasing your deductible, drive fewer miles, keep a clean driving record, and bundling home and auto insurance.
The information provided on this website is for general informational and educational purposes only and should not be considered legal, financial, or insurance advice. While we strive to keep content accurate and up to date, insurance laws, policies, and regulations can vary by state and may change over time.
Nothing on this site constitutes professional advice or a recommendation of any specific insurance product, provider, or strategy. You should consult with a licensed insurance agent, financial advisor, or legal professional regarding your individual situation before making any decisions.
