In an attempt to balance out the probability for increased claims, drivers in those areas typically have to pay more in insurance premiums. Living in regions prone to natural disasters – including hurricanes, tornados, earthquakes, and blizzards – can increase insurance costs because insurance companies typically have to pay out more money in claims following such an event. ZIP codes with many roads in poor or potentially dangerous conditions are considered more risky and can wind up costing drivers more in auto insurance premiums. Streets that flood easily during rain showers and roads that quickly turn icy in frigid temperatures are also hazardous and may lead to more accidents or vehicle damage. Roads with potholes, rough surfaces, and debris can end up damaging vehicles or causing car accidents as drivers attempt to avoid the unsafe road conditions. The conditions of the roads themselves can affect your probability of filing auto insurance claims. Insurance companies would view those areas as riskier than places where traffic patterns promote safer driving outcomes. Roads with high speed limits, curvy roads with visibility issues, complicated intersections and unclear signage can all lead to higher rates of traffic accidents. Traffic patternsĪnother factor that impacts car accidents – and thus, auto insurance claims – within a ZIP code is traffic patterns. On the other hand, ZIP codes with a low population density usually have less occurrences of car accidents, and auto insurance policies in those areas tend to be cheaper. Auto insurance policies tend to be more expensive in high-density areas as a result. More people living in an area generally leads to more cars on the road, more traffic congestion and higher accident rates. If drivers in your ZIP code tend to file more car insurance claims than average, insurance underwriters might issue more expensive policies. The amount of auto insurance claims filed within your ZIP code can affect your premium. Here’s what else insurance companies look at when determining the cost of car insurance premiums. Busy cities tend to have more people on the road causing accidents and higher crime rates, which might have insurance companies shelling out more money for instances of car theft or vandalism. If you live in an urban area, chances are you’re going to face higher car insurance prices than if you were to pack up and move to a rural area. 8 risk factors for car insurance that vary by location Now, let’s dive a bit deeper into these location-related risk factors. Some of the risk factors they might consider include: How insurance companies use ZIP codes to determine riskĪuto insurance underwriters use the statistical data associated with your ZIP code to determine the risk of insuring your vehicle where you live. Knowing the primary location for your vehicle helps auto insurance providers evaluate the risk associated with insuring your car. Insurers use your garaging address in the same way they use your ZIP code. When you’re working with an insurance agent or trying to get a policy quote online, you may come across the term "garaging address." Your garaging address is simply the primary place where your vehicle will be parked overnight – even if it’s not actually in a garage. However, some states – including California and Michigan – have laws that prohibit insurance companies from using ZIP codes as a rating factor. While the particular city and state you live in can help determine that risk, your ZIP code gives insurance companies a more specific picture of the risks that come along with insuring you. If where you live is seen as having a greater likelihood of you filing auto insurance claims, the insurance company will typically give you a higher auto insurance rate to offset the money they may potentially need to pay out in claims. Why is your ZIP code important for insurance?Īuto insurance companies want to make sure they are collecting more money in premiums than they are paying out in claims. If you live within a ZIP code that’s viewed as less risky to insure, you may benefit from lower rates. These are just a few examples of how an increased risk associated with your ZIP code can lead to higher auto insurance rates.
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