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Many Americans are missing out on substantial savings on car insurance quotes, according to a NerdWallet study. The potential savings are particularly great in 11 states.
The findings, based on insurance quotes from across the country, show that the typical driver can save $859 per year by shopping around for coverage, although the amount is far greater in some states and much less in others.
We found the average savings for drivers in each state by comparing the average quote from insurance carriers, weighted by market share, compared to the average of the lowest available quotes.
Even drivers in states with very high rates on average may be able to find much lower premiums. Differences between quoted premiums can be large because each insurance company bases rates on its own claims experience with particular car models, places and types of customers.
Here are the 11 states where drivers can save the most on car insurance.
[Are you paying too much for car insurance? Compare quotes through NerdWallet’s Car Insurance Comparison Tool.]
1. Michigan
- Weighted average premium: $6,262 per year
- Average minimum premium: $2,426 per year
- Typical savings: $3,836 per year
Michigan’s auto insurance is so expensive that the amount drivers can save each year by shopping around, in dollar terms, tops the next-closest state by more than $700. Using our uniform criteria, we found quotes of well over $10,000 a year for car insurance in Michigan, compared with a maximum of $6,900 in Delaware, the No. 2 state.
Michigan’s unique unlimited coverage for car accident injuries is the biggest factor in its high costs, according to Jeremy MacDonald, president of the Mid-Michigan Agency, an independent insurance agency, and a board member of the Michigan Association of Professional Insurance Agents. While the Michigan Catastrophic Claims Association reimburses insurers for medical costs of more than $545,000 per occurrence, insurers still bear much higher claim costs in Michigan than they do in other states, driving up the rates for all customers, he adds.
In Michigan, some insurance companies intentionally set high prices because they’re not trying to compete for business there, another reason savings can be so large, MacDonald says.
2. Delaware
- Weighted average premium: $4,401 per year
- Average minimum premium: $1,297 per year
- Typical savings: $3,104 per year
Delaware is one of just four states — other than no-fault states — where drivers are required to buy personal injury coverage, according to the Insurance Information Institute, an industry group. Buying additional coverage raises drivers’ costs.
Another factor contributing to high premiums might be large payouts resulting from accidents in nearby cities, including Washington, D.C., Baltimore and Philadelphia, which are the first-, second- and sixth-worst cities for collisions respectively, according to the III.
3. Texas
- Weighted average premium: $2,679 per year
- Average minimum premium: $913 per year
- Typical savings: $1,766 per year
The Gulf Coasts of Texas, Florida and Louisiana get hit more frequently and intensely by hurricanes than any other places in the U.S. This boosts the amount Texas’ auto insurers must pay in comprehensive auto insurance claims — and drivers’ premiums. A 2013 report from the National Insurance Crime Bureau also found Texas was the fourth-worst state for insurance fraud tied to organized crime, which increases rates for all drivers.
4. Utah
- Weighted average premium: $2,299 per year
- Average minimum premium: $691 per year
- Typical savings: $1,608 per year
Utah is a no-fault state, meaning that a driver’s auto insurer is generally responsible for auto-related injuries suffered by the driver and any passengers, regardless of who caused them. There are 12 no-fault states, and four of them — Michigan, Utah, Florida and Minnesota — cracked our list of states where drivers can save the most on car insurance.
5. Mississippi
- Weighted average premium: $1,867 per year
- Average minimum premium: $508 per year
- Typical savings: $1,359 per year
Mississippi’s average low quote is the lowest in the nation, at $508 per year. But the weighted average quote among carriers that do business in the state was $1,867, which ranked as the 14th-highest among the 50 states and the District of Columbia. So Mississippi residents should be able to save quite a bit by shopping around.
Mississippi has the second-highest fatal crash rate per 100,000 residents (20.5) in the U.S., according to an Insurance Institute for Highway Safety analysis of National Highway Traffic Safety Administration data.
6. Florida
- Weighted average premium: $2,158 per year
- Average minimum premium: $1,032 per year
- Typical savings: $1,126 per year
Like several other states on this list, Florida sits on the Gulf Coast, one of the nation’s worst places for hurricanes. Florida has also been known as the nation’s top state for questionable personal-injury auto claims and has ranked as the worst state for insurance fraud tied to organized crime, although a 2012 anti-fraud law has helped, according to the National Insurance Crime Bureau. All of these factors drive up insurers’ costs, and, thus, consumer premiums. And two of the U.S.’ 10 worst cities for car crashes — Hialeah and Miami — are in Florida, according to the Insurance Information Institute.
7. Minnesota
- Weighted average premium: $2,242 per year
- Average minimum premium: $1,203 per year
- Typical savings: $1,039 per year
There’s a $4,498 gap between the highest and lowest rates we found for Minnesota drivers in our study. The market in the state is highly concentrated, with State Farm accounting for nearly 24% of auto policies, followed by Progressive (14%) and American Family (11%), according to SNL Financial and the Insurance Information Institute.
If a few companies dominate a market, the lack of competition can drive up premiums. It can also lead to larger gaps between rates, either because some companies don’t try to be competitive in those states or because they lower prices in an effort to gain market share.
8. Oregon
- Weighted average premium: $1,735 per year
- Average minimum premium: $768 per year
- Typical savings: $967 per year
Oregon’s car insurance market, like Minnesota’s, is heavily dominated by a few companies: State Farm (21% market share), Farmers (13%), Progressive (11%) and Liberty Mutual (10%), according to SNL Financial and the Insurance Information Institute.
9. Georgia
- Weighted average premium: $1,722 per year
- Average minimum premium: $763 per year
- Typical savings: $959 per year
Atlanta is the nation’s most sprawling large metropolitan area, according to the advocacy group Smart Growth America. The region has the second-most miles of roads per resident and fourth-worst traffic congestion in the U.S., according to an entry that two University of Georgia professors wrote for the New Georgia Encyclopedia. That means more driving and the potential for more accidents.
10. Louisiana
- Weighted average premium: $2,857 per year
- Average minimum premium: $1,960 per year
- Typical savings: $897 per year
In addition to its high risk of hurricane damage, Louisiana has a combination of other factors that boost car insurance rates. The state has higher than average population density, a high rate of bodily injury claims — which tend to cost more than property damage claims — and a high rate of uninsured drivers, according to insurer Esurance. Louisiana’s car insurance market is also heavily dominated by State Farm, which has a 33% market share.
11. New Hampshire
- Weighted average premium: $1,777 per year
- Average minimum premium: $905 per year
- Typical savings: $872 per year
New Hampshire is the only state where drivers aren’t legally required to buy car insurance or prove they could cover their liability in an accident. It’s also close to Boston, which ranked last out of 200 cities on Allstate’s 2015 “America’s Best Drivers Report” and is the nation’s sixth-worst metropolitan area for congestion, according to data company INRIX.
It pays to shop around
Regularly comparing car insurance quotes will help ensure you’re getting a good rate. A NerdWallet survey, done in conjunction with the study, found 70% of consumers have been with the same auto insurance company for at least four years, 38% have never compared quotes and just 16% shop around every year.
If you want to see how your rates stack up, try NerdWallet’s car insurance comparison tool.
Aubrey Cohen is a staff writer at NerdWallet, a personal finance website. Email: [email protected]. Twitter: @aubreycohen.
Image via iStock.
