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How does where you live affect your insurance?

Insurance Revolution Blog

Insurance is compulsory the moment you buy your car. Certainly, your car is one of your dream assets and you definitely desire for the best protection possible and it’s little wonder that most of the States have made it mandatory for car owners to get their insurance. Now, how much would be the premium? Well, precisely, the premium rate would vary from one zip code to another and you can be subjected to increased insurance based on your residential location. A broad spectrum of factors is accountable for spiked insurance rates depending on the area. Actually, your area of residence plays a key catalyst in determining risks of accidents in your location as well as the cost of mishap. More are the chances of crashes and higher the volume of compensations, more would be the insurance rate.

The post below highlights on the different parameters of residential location can lead to increased insurance rate.

Population density

Dense population is one of the major factors behind increased insurance premium. The logic behind it is really simple- more cars imply more numbers of fender benders and hence a densely populated zip code would show a comparatively higher number of claims compared to a sparsely populated one. Thus, if you are staying in a populated area, the insurance would always pass on a higher premium fearing possibility of a greater number of claims.

Rural & urban

People living in urban areas are generally subjected to higher insurance rates compared to those of rural areas. It’s mostly because city roads are spotted with comparatively more numbers of cars and hence there would be more numbers of accidents compared to rural areas.

Weather of the location

Is it that your area is often subjected to extreme weather conditions? If your answer is a “yes”, then be prepared to pay for increased insurance rate compared to your friend who lives in a comparatively plain location. Zip codes that are usual to encounter hail storms, torrential rain, hail storms, flood are more prone crashes, skids and car damages. No wonder, the residents there would forward a higher number of claims which invariably means increased insurance premium from the insurance companies.

Crime rate of the area

If you are staying in a crime prone location, you would be usually subjected to increased insurance compared to a person who is staying in a comparatively safer zone. A crime-prone location is often targeted to vandalism, break-ins and auto theft which mean more pressure on the insurance companies which they pass on as higher insurance premiums to the residents here.

Condition of local roads

The condition of local roads play a decisive factor in the rate of crashes and accidents. A road infested with risky intersections & pot holes would anyday stagger the dangers of accidents compared to roads that are thoroughly well designed & maintained. Thus, if your local roads show a poor state, your insurance company would always pose an increased insurance premium on your policy.

Unemployment levels

If you are staying in a zip code marked by higher unemployment level, you might have to face increased insurance rates. Actually, there are two factors behind it. One is that the unemployed people often forgo insurance and thus those taking to insurance often have to pay more while hit by some uninsured motorist. Moreover, more the level of unemployment, higher would be the crime rate. Thefts are often caused by unemployed people desperately looking for a source of income and don’t mind getting it the crooked way.

State of Public safety

The nature and state of public safety in your location would also affect the insurance rate. If you are staying in a place applauded for aggressive traffic laws, their appropriate implementation and prompter response times- you can be said to be staying in a safer area with less chances of accidents and hence lesser number of claims. But then, if your area shows slack in the maintenance of traffic and road safety laws, the location is more prone to rash driving, resulting in higher number of accidents. All these would accumulate to increased insurance rate compared to the former area.

Volume of claims

This is certainly a no-brainer. We have been discussing since the beginning that if the insurance company finds your locality more prone to forwarding claims- then the car owners there would be subjected to higher insurance premiums.

Medical benefits

Medical benefits available as per your State’s policy would also affect your insurance rates. States like Michigan assure unlimited protection in personal injury cases and have made it mandatory for insurance providers to pay the victims up till 3 years of their lost wages. Eventually, the insurance companies there pass on some of the burden to the clients through higher insurance premiums.

Legal affairs of your area

There are two stances here. One, if there are higher number of lawyers in your zip code compared to other areas, you would have to pay higher insurance rates. It’s because, more the numbers of lawyer, higher would be the volume of lawsuits and claims for insurance companies. The other one is the response of jury in regards to insurance claims. There are States like Louisiana where judges are favorable to the insured victim, making the insurance company pay a higher compensation. Naturally, in such States, the insurance companies would often ask for higher insurance premiums. 

However, it’s always suggested that you take a comparative study among at least 5 insurance companies before deciding on the final one. It’s true that if your residential location fulfills any or some of the parameters mentioned above, you are likely to face higher insurance rates. But it’s also true that the rates vary from one company to another. So, a smart comparative study beforehand might get you competitive rates. But then again, do not aim for the cheapest deal. Quality does not come cheap. You should also be careful about the reputation of your chosen insurance company before signing up with it.


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