Why Does Car Insurance Rate Vary by State?

Comparing car insurance quotes can be a nightmarish prospect. With so many different companies to choose from, questions may arise as to what each company has to offer and what’s included in the charges. A common inquiry is: Why do car insurance rates vary by state?

Insurance rates vary based on what kind of car you drive, your age, and where you live, but on top of all, each state requires something different of its drivers. Car insurance rates are made up of 6 different parts: Bodily Injury Liability, Property Damage Liability, Medical Payments or Personal Injury Protection, Collision Coverage, Comprehensive Coverage, and Uninsured/Underinsured Motorist Coverage.

All states, except for Wisconsin and New Hampshire, require that drivers carry liability insurance and even in those two states, they demand proof that you will be able to pay for accidental damages. The minimum liability insurance mandated changes from state to state and includes the Bodily Injury Liability and the Property Damage liability. Bodily Image Liability covers the harm you may cause someone else, including their medical bills and lost wages. Property Damage Liability pays for the repair or replacement of damaged property caused by an accident.

Collision Coverage covers repairing your own vehicle in an accident, and Comprehensive Coverage, harm to your car due to something like fire, theft, and natural disaster, are both voluntary in all states. However, you may be required to get one or both of these for your car by a bank if you are financing your car. Once your car is paid in full you can drop these options if you choose.

Medical Payments is when the insurance company will pay for medical expenses that you and your passengers may incur in an accident. Personal Injury Protection (PIP) is similar to paying for medical bills as well as lost wages for any injured parties including yourself and your passengers. There are 16 states that require Personal Injury Protection coverage by their drivers.

Finally, Uninsured/Underinsured Motorist (UM) coverage pays for your medical bills if you are hit by someone who is uninsured or a hit and run accident. UM also covers when someone who has caused an accident doesn’t have enough insurance to cover all medical bills. Uninsured Motorist coverage is required by only five states: Connecticut, Maine, Minnesota, North Carolina, and Vermont.

While there is additional coverage that can be added to your premiums, the states do not require these. Car insurance rates can be found and compared online. Furthermore many state insurance departments will have an annual report of consumer complaints against each insurance company within that state, so you can compare the quality of each car insurance company.

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