You cannot drive in most states in the U.S. without car insurance. If you own your car, you can opt for liability coverage and absorb the costs of any damages to your vehicle. This keeps your premiums down a bit.
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However, if you are still paying on your car, the lien holder (the bank or finance firm) can insist that you carry a certain level of insurance, so that they are protected as owners while you are protected as the driver.
You may find some lists that deviate a bit from this one, due to analyzing data from different years, and in different ways. Still, you will find this an accurate review of the top ten states with the most expensive car insurance.
While each state listing below will cite specific resource(s), all figures for 2016 premiums are taken from a study commissioned by Insure.com from Quadrant Information Services.
AVERAGE ANNUAL PREMIUM: $2,510.87
WHY IT’S SO EXPENSIVE: Populist justice and bad roads
Louisiana’s average policy premium of $2,510.87 led all states in 2016. The high rates start with the fact that jury trials are reserved for claims exceeding $50,000. This gives insurers the incentive to settle claims out of court, a lot of them right at $49,999. The election of judges also means that settlements are based more on populist passion than the facts of the case. Finally, Louisiana has an aging, crumbling road system, which contributes to risk.
AVERAGE ANNUAL PREMIUM: $2,098.29
WHY IT’S SO EXPENSIVE: Lifetime benefits for accident victims + unemployment
Like all but two states, Michigan requires drivers to carry auto insurance. In one major deviation from all other states, however, Michigan mandates unlimited medical care for accident victims as long as they live, regardless of the insured party’s policy limits. Private insurers cover the first $460,000 of benefits. The Michigan Catastrophic Claims Association “pool” covers the rest.
Called Personal Injury Protection (PIP), this policy drives up rates and has the perverse effect of making car insurance the number one source of medical coverage. Michigan’s 15% unemployment, the country’s highest, means more people drive uninsured, making rates go up even more.
AVERAGE ANNUAL PREMIUM: $1,869.39
WHY IT’S SO EXPENSIVE: Required coverage and “exclusion confusion”
Liability insurance is mandatory in Oklahoma, with higher minimums that other states, which must cover both bodily injury and property damage. The penalties for letting coverage lapse, or even driving without proof of insurance, are substantial.
The state also permits insurers to exclude particular family members, and also to list circumstances in which coverage will be rescinded or claims denied.
Some insurance buyers end up with “exclusion confusion,” unable to figure out who or what is covered. This leads to an inordinate number of disputes that take time, money, and court hearings to settle, driving up costs for everyone. Finally, if you do let a policy lapse even a single day, insurers can raise premiums immediately upon reinstatement.
AVERAGE ANNUAL PREMIUM: $1,857.96
WHY IT’S SO EXPENSIVE: Broad high-risk categories and rising numbers of uninsured
Montana is serious about its car insurance requirement. Driving without coverage is a misdemeanor, and you could earn a three-month jail sentence and fine. Repeated problems can get your license permanently “cancelled.”
Like other states with faltering economies, many people are risking these sanctions because they are broke. There are other factors, too, that make Montana an expensive state for auto coverage. Whole classes of drivers are considered “high risk,” which makes sense for those with multiple accidents – but for all new drivers?
To escape higher premiums, new drivers can at least show proof of completing a driving training course. The only option for others, though, is a monthly installment plan to make more frequent, but lower, payments.
AVERAGE ANNUAL PREMIUM: $1,774.41
WHY IT’S SO EXPENSIVE: Too many people (and too many uninsured motorists)
A high percentage of accidents involve uninsured drivers, which drives up rates everywhere. But nationwide, just 14% of accidents are caused by the uninsured, while the figure is 33% in the rest of California.
Most drivers there carry uninsured motorist coverage, which means their insurance company will be paying for both sides in an accident involving the uninsured. Rates continue to rise in California because the population continues to do so – and fast.
With ever-increasing traffic, it comes down to simple odds. With a population closing in on 40 million, about an eighth of all Americans, there are literally millions of car accidents and insurance claims in California annually. In this state, every driver is considered a high risk, simply because of the surroundings.
AVERAGE ANNUAL PREMIUM: $1,772.83
WHY IT’S SO EXPENSIVE: High minimum coverages, no leeway in enforcement
South Dakota requires among the highest coverage minimums of any state, outpaced by only Alaska and Maine. The minimum coverage in South Dakota is 25/50/25.
These figures represent dollar amounts, in thousands, for bodily injury per person (including medical costs and lost wages), total accident liability (for two people), and any property damage (buildings, fences, even road surfaces). The rigid application of these regulations has resulted in steadily rising premiums.
There are numerous factors affecting car insurance premiums, including the auto’s cost, how often the model is stolen, driver age and location, even credit ratings. It is also difficult, if not impossible, to harmonize the numbers in various reports due to the different methodologies and statistical maneuvers. This creates a problem for insurance shoppers.
The best thing to do if you live in a high-premium state, short of moving away, is to study, read, and read some more. Find out what factors you can affect, and how they in turn affect your potential premium payment. Call around, talk to a few agents, make your best deal – then drive safely and steer clear of trouble!