Tae-Nyun KimPh.D., Associate Professor of Finance, Department of Finance, School of Business, The College of New Jersey on WalletHub Discussing Cheap Car Insurance
Why do car insurance rates (and even providers) vary so much from state to state?
There are a number of factors that contribute to the determination of car insurance rates. In most cases, these factors are correlated with the likelihood of a car accident. A geographical factor plays an important role in determining the probability of a car accident. You are more likely to be involved in a car accident if you live in a crowded state. Therefore, insurance rates should differ between states. Rates should be higher if you are more likely to file a claim on your insurance. In order for insurance companies to remain profitable, they adhere to that principle.
Is it riskier to drive in some cities and states than others?
Historically, some areas have been more prone to car accidents than others. As a result, you should be more cautious when driving in such areas. Again, geographical factors play a significant role in determining car accident probability, as some areas are more dangerous than others for driving.
Why do you think credit history has more of an impact on car insurance rates in some states than others?
The likelihood of a driver filing a car insurance claim increases when they have a lower credit rating. Consequently, insurance companies must charge higher rates to individuals with poor credit ratings.