Help for the Urban Driver: How to Save on Higher-Than-Average Car Insurance Premiums

by AutoInsuranceQuotes.org Staff Writer on May 14, 2013


If you live in an urban area, you may expect to pay more in rent, groceries, and utilities than your suburban counterparts. Now add to that list: car insurance.

Your location is just one of many factors that help determine your car insurance rates, but it can be a major one. It’s accepted as a fact of life that if you live in an urban area, you’ll pay more in car insurance than if you lived in a more suburban or rural one. As the logic goes, when there are more people, there’s greater potential for an accident. More densely populated areas also tend to have greater incidents of crime, which can make you more of a risk in the eyes of an insurer.

How much of a difference does it make? Research has shown that the cities that have the highest car insurance rates also tend to be urban areas — prone to such insurance-raising factors as high traffic, high vehicle ownership, car theft and vandalism, and fraud. Take a look at Detroit. According to a Runzheimer International analysis of the most and least expensive cities for automobile insurance, the Motor City has the highest car insurance rates, with an average annual premium of $5,941. Coincidentally, the city also has a high crime rate, ranked second on City-Data.com’s list of least-safe cities and featured among the top 20 “hot spots” for car theft, according to the National Insurance Crime Bureau (NICB). Meanwhile, the cities where cars are least likely to be stolen, according to the NICB, are in comparatively less urban areas, such as State College, Pa., Glens Falls, N.Y., and Sheboygan, Wis., three cities that, incidentally, were also ranked among the safest in the country by CQ Press based on F.B.I. data. And you won’t find these locales anywhere near the top of lists ranking the cities with the most expensive car insurance.

New York City is another metro area that is synonymous with high car insurance premiums. It also boasts one of the most densely population areas in the United States and has some of the worst traffic. A recent report by the Texas Transportation Institute found that in 2012, drivers in the New York region spent 59 hours a year — and lost $1,281 in congestion costs — sitting in traffic. Fraudulent or inflated claims also are driving up insurance premiums; according to the New York Post, drivers in Brooklyn paid an average of $2,143 a year in insurance premiums in 2009 — 72% higher than the statewide average — in part due to massive insurance fraud.

Similar stories can be found at urban areas across the country, from Philadelphia, whose high traffic density contributes to an average annual premium of $4,076 based on Runzheimer International analysis, to Miami, which ranks among the top 50 hot spots on the NICB’s car theft report and has one of the highest average annual premiums, at $3,388. For comparison, the Runzheimer International data found that in the cities with the lowest car insurance rates — places like Portland, Maine, and Boise, Idaho — the average annual premium ranged from $937 to $1065.

What is an urban driver to do? Not buying car insurance isn’t the answer, of course, but unfortunately, many drivers do just that. In Detroit, a widely cited 2008 report from the Detroit Legal News found that more than half of all drivers are uninsured — owing in part to the city’s high car insurance premiums. But whether you use your car sporadically for weekend getaways or big trips to Ikea, or regularly to get to work, you can find relief. Big cities are improving transportation options so that their residents don’t have to be so reliant on their cars and starting to enact legislation to take the burden of car insurance costs off drivers so you’re not stuck with a bloated bill each month.

Mass Transit: Helping Cities Become Less Car-Centric

Mass transit has long helped limit or eliminate car use, as well as ease congestion and reduce the risk of accidents occurring. But recently, extending and making public transportation more accessible and user-friendly to offer drivers a different option is part of a nationwide trend — and its getting drivers off the roads. Hampton, Va., right outside of Norfolk, saw a 154% increase in public transportation rides since extending its rail line in August 2011, according to a recent report from the American Public Transportation Association (APTA). The report also found double-digit increases in public transportation rides in Memphis, Dallas, Los Angeles, Pittsburgh, and Seattle, and increases in commuter rail ridership in Austin, Seattle, Baltimore, Philadelphia, and Los Angeles. Cities like Salt Lake City and Phoenix that developed rail transit in the past decade also saw boosts in ridership.

Overall, more people than ever before are turning to public transportation. In fact, 2012 ranked as the second-highest transit ridership year since 1957 — second behind 2008 — with rides on subways, commuter rails, light rail, trolleys, and buses increasing 1.5% over the previous year. The study’s authors see these figures as representing a sea change in the way people look at transportation.

“There is a sea change going on in the way that people look at transportation,” APTA President Michael Melaniphy said in a statement on the study. “Americans want travel choices; they want to be able to choose the best travel option for their lives.”

Los Angeles is one such city where residents’ views towards public transportation are changing. The nation’s second largest city with nearly 4 million people, the city is notorious for its traffic jams. It’s even been named the worst city in the nation for traffic by the Texas Transportation Institute. Given this high risk, car insurance costs are also predictably high (California as a whole has one of the highest premiums in the nation, with an average annual premium of $1,819, according to a Insure.com). However, the city has started taking measures to help drivers become less dependent on their cars, which can help lower their risks behind the wheel — and their insurance costs. In 2008, voters passed a bill to raise sales taxes a half cent to help fund transportation projects and upgrades throughout the county. This includes the creation of a light rail line on the Westside and extensions to existing lines spread out over the next 30 years.

Even cities that already have extensive public transportation systems are working to increase commuters’ options and become less reliant on cars. In New York City, more commuters than ever are taking advantage of the subway system’s 21 interconnected routes. In 2012, the average weekday subway ridership was 5.4 million, the highest since 1950, with annual ridership at also at a high at 1.7 billion. In addition to the extensive system already in place, New York City has begun a $4.4 billion project to create a new subway line for east side Manhattan commuters, as well as a $2.1 billion subway line extension of the 7 line. The projects are scheduled to be finished in 2016 and mid-2014, respectively.

Law-Making: Working to Relieve Bloated Premiums

High car insurance premiums in certain areas may have more to do than just high-density or traffic. Michigan, which has the highest car insurance premiums in the nation according to the Insure.com report, offers unlimited lifetime medical care for auto-related injuries under its no-fault auto insurance system. It’s the only state to do so, and such an expansive system is also expensive. Policy holders must pay an extra $175 per insured vehicle a year because of it. When you add in the fact that more than half of drivers in Detroit are uninsured, that can also mean higher rates for the city’s residents.

To help lower the runaway car insurance rates, state legislatures have recently introduced a bill that would put a cap on Michigan’s unlimited personal injury protection coverage and require auto insurance premiums to be lowered by at least $125 per vehicle in the first year, with the potential for larger savings later. The move is not without its detractors, with opponents arguing that the reductions aren’t worth losing unlimited medical benefits, but the talks to curb the state’s outrageous car insurance costs are encouraging.

Other states have also responded to calls for reduced insurance premiums with legislation. In Florida, which is a no-fault state, fraudulent insurance claims resulting from staged car accidents have been rampant, driving up premiums. According to the NICB, fraudulent claims rose 119% in Florida from 2008 to 2010 alone. To discourage fraudulent insurance claims, and potentially bring down car insurance premiums, a new bill went into effect earlier this year that puts a limit on the amount of personal injury protection available for victims of accidents. It will take a few months to see what effect the legislation has on drivers’ rates.

How to Save on Your Premium

Regardless of alternative transportation options such as rail systems, buses, or even riding a bike, if you own a car in an urban area, your auto insurance is still going to cost you more than it would in other parts of the country. If your local or state government isn’t working to decrease the cost of your premium through alternative transportation options or legislation, there are still a number of ways you can help yourself and save a little bit of extra money a month by being a smarter urban driver.

Shop around

Insurance companies each use different formulas to determine your rate, charging more or less for certain zip codes. By shopping around and getting quotes from a variety of insurers — both national and independent — you can find the best price for your wallet. The Insurance Information Institute recommends getting at least three price quotes.

Limit your car usage

In addition to location, car insurance companies also factor overall mileage into determining your rate. If you only drive your car occasionally, or have a short commute, you may qualify for a low mileage discount. If you’re driving your car every day to work, but have a viable transportation alternative, such as a subway or commuter rail, you should talk to your insurance provider to see what your savings might be if you change your habits. Of course, you’ll want to make sure that any potential car insurance and gas savings are greater than what you’ll have to start shelling out for public transportation.

Change your car

If you’re in the market for a new car, what you buy may save you money — in the end helping off-set high car insurance premiums in your city. For instance, under California’s Clean Vehicle Rebate Project, drivers can take advantage of rebates of up to $2,500 for plug-in hybrids and other zero-emission vehicles. Since implemented in 2009, the program has been so popular, the state recently had to pump more money into the rebate account. You can find out what incentives and rebates are available in your state by going green through the National Conference of State Legislatures.

Discourage theft

It’s harder than ever to steal a car today, thanks to developments like immobilizer chips in car keys, positioning technologies, and advanced theft-deterrent systems. If you’re driving an older model that’s not as hip to these advancements, there still are ways you can discourage thieves. A steering wheel lock can be a common sight in urban areas because they make cars look like less of an easy target. Similarly, a “tire claw” lock can keep one wheel from moving and thus harder to steal. For a bit more money, you can install a car alarm that will go off if a car door is opened without a key. If your car doesn’t have a built-in immobilizer chip, you can mimic the safety feature by installing a “kill switch” at a secret spot in your car that then needs to be turned on to start the engine. These theft deterrents may cost you a bit of extra money, but you can talk to your insurance provider to see if they will help lower your rate.

Be a good driver

Many insurance companies offer discounts to customers simply for being good drivers. If you’ve had a clean driving record — no accidents or moving violations — for at least three years, you may be eligible for a good driver discount. Similarly, taking a defensive driving course may also help lower your rates.

High car insurance rates don’t have to a necessary evil of living in an urban area. By knowing your options and what’s going on in your city, you can become a smarter driver and make more informed decisions about when and what you drive — in the end helping reduce your risk and cost of being insured. Even if it’s just a few dollars a month, it’s money worth saving.

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