How does auto insurance differ by state? And when you’re moving from one state to another, how will that affect your car insurance coverage? We have answers to all of these questions, and more. If you’re uncertain about how auto insurance by state works, just keep reading. By the time you’re done, you’ll learn a ton of new info about how car insurance works in your state or any other state you might move to in the future.
Why Does Auto Insurance Vary by State?
The answer to that question is: because states are allowed to make different laws and regulations governing how auto insurance is issued and sold. The most important factor for you, as a driver, to know is how the state minimums work so that you can stay within the limits of the law. But there are other factors, such as local demographics, which can also heavily influence your monthly premiums.
Liability Coverage and PIP
Almost all states require liability coverage, except for New Hampshire, where auto insurance is technically optional. However, in order to drive legally in New Hampshire, you must prove that you are financially responsible enough to have enough liquid assets on hand to pay in the event that you are held liable in an accident. For most drivers, proving this level of financial responsibility is so cumbersome that purchasing auto insurance is the better option.
Liability coverage is required almost universally because this is the coverage that pays out on claims that are filed against you if you are found to be at fault. If the other driver is at-fault, then their liability coverage will pay for your damages. If neither are found to be at fault or if you live in a state where fault is divided among all involved parties, it gets trickier.
Liability coverage is divided into two categories: bodily injury, and property damage. Furthermore, there are three different coverage limits you may be required to purchase: bodily injury per person, bodily injury per accident, and property damage per accident. In some states, instead of being required to purchase bodily injury liability, you may have to purchase personal injury protection (PIP) instead. This basically covers the same expenses and pays out the same claims as bodily injury liability, but it is used in no-fault states when clear fault in an accident is difficult to establish.
|States which ONLY require PIP and Property Damage Liability||States which require PIP in addition to Bodily Injury Liability|
|New Jersey |
Uninsured/Underinsured Motorist Coverage
Beyond bodily injury liability per person, bodily injury liability per accident, and property damage liability per accident, you may live in a state that requires you to purchase uninsured motorist coverage per person and uninsured motorist coverage per accident. This type of coverage pays out claims on any medical bills or property damage you may sustain as a result of an accident that is not your fault, but rather the fault of the other driver under one of these three circumstances:
- The other driver does not have insurance at all
- The other driver is underinsured and therefore does not have enough insurance coverage to pay all of the expenses they owe
- You are the victim of a hit-and-run accident, and the at-fault driver cannot be found
Normally, their liability coverage would pay for your expenses. But if the other driver doesn’t have insurance, if they cannot be found, or if their insurance isn’t sufficient, then the claims you file will default to your uninsured/underinsured motorist coverage. Nearly half of all states require either uninsured coverage or a combination of uninsured/underinsured coverage in addition to basic liability coverage requirements.
Tort Vs. No-Fault States
The state you live in can be divided into one of two categories as far as auto insurance is concerned: tort states, and no-fault states. In a tort state – which is most states, 38 out of 50 to be exact – there is always blame assigned to the involved parties for an accident. Different states will determine fault in different ways, and some states may divide the blame evenly or assign a larger percentage of blame to one driver over another. In some states and with some insurance companies, having a larger percentage of blame assigned to you means that you and your insurance company will be required to pay out an equally proportional amount of the expenses owed in the form of medical bills, property damage, funeral expenses, and the like.
In no-fault states – of which there are 12 – you don’t have to worry about getting liability claims paid out by the car insurance company of the at-fault driver. You will deal with your insurance company directly instead, and if there is any disagreement about who is at fault, the insurance companies will sort it out amongst themselves. Those states include:
- New Jersey
- New York
- North Dakota
There are some states with special laws regarding liability, fault, and who pays for what when an uninsured driver is involved. These laws are called “no pay, no play” laws. Basically, if you are involved in an accident in one of these states and you are driving without insurance, your ability to recoup financial losses and get your expenses paid for is throttled. You may still receive a financial payout if you are not at fault but driving without insurance and suffer economic damages, medical bills, and property damage. But for things like pain and suffering or mental anguish, you will most likely not be allowed to litigate. Those states include:
- New Jersey
- North Dakota
Moving to a New State: Can You Keep Your Car Insurance?
The answer to this question is: that depends. Not all car insurance companies are allowed to operate in all 50 states. Your current car insurance provider might not be able to continue offering you coverage if you move outside of your current zip code. This will lead you on a brand new search for a new car insurance company to meet your needs. But this will give you the perfect opportunity to comparison-shop among new providers who are all competing for your business.
How to Change Your Auto Insurance When Moving to a Different State
It’s very important to get in touch with your auto insurance company and notify them as soon as you figure out that you will be moving. In order to be able to drive legally in your new state, you will have to adjust the amount of coverage you carry in order to comply with local laws. You will also likely require proof of insurance before registering your vehicle in your new state to make sure your vehicle and your insurance coverage are compliant with state and local regulations.
For some drivers, this minor inconvenience can be a blessing in disguise, as it can give you the opportunity to purchase less coverage and save on your monthly premiums. For other drivers, the opposite may happen: you may be required to purchase more coverage in order to comply with your new state’s laws and have to start paying higher monthly premiums. But there’s a third option, as well: you can start shopping around for a new auto policy with a new auto insurance provider in your future zip code in order to ensure that you get the best available rate in your area.
Auto Insurance from State-to-state: Demographics Matter
Let’s perform a thought experiment and assume that you and your vehicle are staying the same, and the insurance requirements in your new state are exactly the same as they were in your old state. More often than not, even in these scenarios, your future insurance rates could be dramatically higher or lower than they were under the exact same circumstances in a different state. Why is this? It’s because demographics matter. The demographics of your new area can have a huge influence on your monthly premiums. Some things to consider include:
- Crime rates. Things like theft, vandalism, and especially auto theft will have a significant impact on how much your comprehensive coverage will cost. Similarly, if there are high rates of accidents among uninsured or underinsured drivers in your future zip code, you can expect your rates to rise dramatically.
- Population. If you are moving somewhere that’s more rural, or that has fewer registered vehicles in total, you’ll be less likely to get into an accident because there will be fewer people on the road to get into an accident with. This could end up showing you a decrease in your monthly premiums. Moving from a rural area to a high population area, likewise, could give you the opposite results.
- Insurance industry competition. If there are more companies competing for your business in the state you are moving to, chances are they may try to undercut one another on price in order to get your business. Conversely, if you don’t have many insurance options in the area you are moving too, you may face a steep hike in your monthly rates.
Whether you’re shopping around in-state or preparing for a big move, we wish you the best of luck in your journey and we hope this information has been useful in helping you find the best auto insurance rates in your state.