Where you live can affect what you pay for auto insurance

To determine your premium, auto insurance companies try to predict how likely you are to file a claim -- and how much that claim is likely to cost. Your age, your gender, your driving record and what kind of car you have are all part of the formula. Even where you live can drive up your insurance rate.
Using your home address (where you garage your car) to help determine what you'll pay for auto insurance is called territorial rating. According to Progressive, the following factors can increase your risk -- and premiums:
  • Safety services. Quick emergency response times mean that accident injuries can be minimized. If ambulance services are unreliable, accident victims are less likely to get quick treatment, and insurance companies could end up paying higher claims.
  • Local laws. If distracted driving laws, drunken driving laws and other traffic laws are enforced aggressively, roads are likely to be safer, and claims are likely to be less frequent.
  • Being in an urban area. City dwellers tend to pay more than rural drivers. More traffic and, often, more car theft and vandalism mean that cities pose a bigger risk to insurers.
  • Weather. Frequent bad weather can increase the risk of accidents.
  • Litigation climate. If an area has more lawsuits, that can be a red flag for insurers -- as it means they'll likely have to pay court costs for accidents their customers get into.
  • Road design. Well-designed roads and intersections can ease congestion and help prevent accidents (and claims).
While territorial rating is nothing new in the auto insurance industry and is allowed by all states, it can vary by location. Some states, for example, limit how much location can be weighted in determining a premium, while others prevent insurers from using ZIP codes to determine rates and require that they have their territorial rating methods approved by the state's insurance department.
Connecticut, for example, has 18 rating territories, according to the state Legislature's website. Insurers are allowed to give only 75 percent weight to a particular territory's experience (traffic, accidents, lawsuits and so forth). The remaining 25 percent of the territory rating must rely on the experiences of the state as a whole. This prevents rates in urban areas from spiraling out of control.

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