6/27/08

New Jersey Has the Highest Car Insurance Rates in the U.S. - Can Anything Be Done?

The state of New Jersey gets a bad rap from the media and in popular culture. Until the Sopranos came around, seemingly nothing about New Jersey was very cool. Adding insult to injury (or more appropriately, injury to insult), New Jersey residents pay the highest car insurance rates in the entire country. This is because so much of the state is urban, the urban areas are densely packed, and more urban residents drive cars than in other areas like New York City. This leads to more accidents, and the high density of people leads to more instances of vandalism and theft.

What Could Be Worse Than Wrecks, Vandalism, and Theft?
But even worse than all of this is the high number of uninsured drivers that come with exorbitant car insurance rates. Uninsured drivers put a strain on the entire system, causing everyone's rates to go up. Therefore, the state government of New Jersey has always tried to play a role in keeping prices down to limit the number of uninsured drivers. Until recently, they did so with a 1983 law that capped urban rates at thirty-five percent above the average rate, but it was argued that this coercive measure led to too much inefficiency in the market.


Now the market may be more efficient, but it sure is costly. A thirty-five-year-old man living in urban Jersey City would pay $1,118 for Allstate coverage, which is seventy-two percent more than if he lived in rural Sussex County. Rates this high inevitably lead to uninsured drivers, which is why Governor John Corzine has proposed a plan to cap urban rate increases until the state completes its efforts to create a better car insurance marketplace by easing regulations and encouraging competition.

The Pros and Cons of Regulation
Opponents of regulation say that it distorts the market and makes low-risk drivers pay more to subsidize high-risk drivers. "The less restrictions you have, the more you let the marketplace work," says Richard Stokes, a lobbyist for the Property Casualty Insurers Association of America. But on the other hand, you have to look at the consequences of not regulating. "If rates go through the ceiling and people can't afford to pay, you are just going to increase the number of uninsured motorists," says New Jersey state senator, Joseph Doria Jr. And uninsured motorists make everyone's costs go up but their own.

The good news is that, with or without the government's help, you can get yourself the lowest possible car insurance rates by shopping around. Rates vary greatly from company to company, so while one insurer may charge seventy-two percent more for urban dwellers, another may charge only thirty-five percent more. Furthermore, yet another company may offer discounts that lower your rates even further! You have to look around to find the best deals, and carinsurancerates.com is a great place to begin your search. Just scroll up to the top left corner and select a type of quote under "Start Your Quote." Good luck!

The Pros and Cons of Car Insurance Regulation - Case Study: California & State Farm

The car insurance industry is regulated by state governments, and as a result, there are 50 separate sets of car insurance rules (51 if you count D.C.). Some states have more "consumer-friendly" regulatory environments, while others are considered to be "pro-business." The truth is that regulations have both positive and negative effects, as evidenced by the current situation in California.

The Case of the Lame-Duck Insurance Commissioner
Each state has its own Insurance Commissioner (IC), a person who serves as the head of the state’s insurance board. As his term was approaching its end, California’s IC, John Garamendi, was determined to make an impact while he was still in office. Garamendi had actually begun the process six months earlier, in June of 2006, when he called on California’s four largest insurance companies - Farmers, Safeco, Allstate, and State Farm - to justify their rates. It was Garamendi’s opinion that these companies were charging too much for both homeowner’s and car insurance.

In California, companies must justify their rates when called on to do so, but instead of going through that lengthy and expensive process, State Farm jumped the gun by requesting the insurance board’s permission to lower its rates. Essentially, State Farm was admitting that it was charging too much and offering to charge less in order to avoid additional scrutiny. The total amount that will be saved by State Farm’s customers in 2007 will be $500 million - including $259 million by its car insurance customers!

The Downside of Regulation
As a result of California’s Insurance Commissioner’s actions, the average State Farm customer in California will save 10% on his or her car insurance bill. Since State Farm will be dropping its rates, its competitors will have to follow suit or risk business to State Farm. So what could be the downside?


Think about it - State Farm had to ask permission to lower its rates! In California, companies are forbidden from radically lowering their rates without the insurance board’s consent. Now in this case, things may be working out fine, but in the future, what is to stop the other car insurance companies involved from using their political clout to prevent a competitor from lowering its rates? We all know how politics works!

In other words, car insurance regulation keeps prices up as much as it keeps them down, and even less stringent regulations have unintended consequences. Would we be better off in a laissez-faire regulatory environment? Probably not; especially since car insurance is the one product that the government says you have to buy. But the important thing to realize is that even the most well-intentioned regulations can have adverse effects, and that both the pros and cons of all regulatory legislation should be thoroughly evaluated.

It’s Your Choice
Sometimes it isn’t just the bureaucrats at the state capital who get to decide. For example, Oregon voters recently had the opportunity to cast their ballots for or against a measure deciding whether or not insurers could consider an individual’s credit score when determining his or her car insurance rates. The citizens struck it down, probably because most voters have above average credit, and they knew that giving good drivers with bad credit a break on their rates would translate into higher rates for both good and bad drivers with good credit.

Regardless of direction in which the political winds are blowing, you can always save on your car insurance. Shop around for the best deal, but first, browse this site to become familiarized with how car insurance works. Not only will you be a more educated voter and citizen, but you’ll also have the knowledge necessary to save money on your rates.

Texans Can Save Big on Car Insurance

We know that there are many factors that affect the cost of our car insurance, like, age, type of car, credit history, geographic location, number of previous tickets, etc. But one thing that generally doesn’t go into the equation is how many miles a day that we drive. Very high mileage drivers are sometimes assessed an additional fee, but the number of miles driven per day to qualify can vary greatly with different companies. Oftentimes, customers are only asked to report their daily commute to work, but are not asked about their other driving habits. Someone may only have a three mile round trip to work, but might drive 300 miles every weekend to their cabin. It’s an inexact science, to be sure.

Savings By the Mile
What this amounts to is that a man who drives twenty miles each week would pay the same amount as someone with the same profile who drives five hundred miles a week. This clearly makes no sense, since the more you’re on the road, the more likely you’ll end up in an accident. Luckily Texas is taking steps to rectify this imbalance. Legislation has enabled auto insurance companies to offer by-the-mile insurance, so you’d pay for insurance the same way you pay for gas! You only use what you need.

This new practice will be more equitable, since previously people paid by the same formula whether they are rich or poor. Obviously this is an unfair practice, since someone making minimum wage and someone making $500,000 a year could easily commute the same distance. However, the person with greater means is going to drive much more. Vacations, trips to the golf course, or visiting friends and family are all things that take extra money, even if it’s just buying gas. Our minimum wage earner is more likely to drive just to and from work, and maybe stop at a corner store on the way home. Why should he pay to subsidize accidents that the wealthy person causes on his drives to his vacation home at the beach?


Good for the Environment as Well as the Wallet
It’s hard to turn on the television or open a newspaper without seeing a reference to our dependence on foreign oil. We know that when gas prices rise, we tend to drive less. Even if you earn a nice salary, you’re probably going to think twice about taking that road trip when you think about how much gas will cost. For people who live paycheck to paycheck, they may have a limited gas budget and will even choose which grocery store to frequent based on the distance from their home. Their decision may be purely economic, but they are, if inadvertently, doing their part to reduce the amount of oil that we need to procure from other countries.

Now imagine if your insurance payment weren’t fixed. How would you drive if you paid for your insurance based on the number of miles that you traveled? Would you choose a closer store rather than the mall in the next town over? Would you think about taking the bus to work? How about riding your bicycle to the video store or park? Could you walk to a convenience store to get a loaf of bread instead of driving to a supermarket?

All of those choices become doubly financial when you consider not just the price of gas, but the price of insurance, too. And without intending to do so, you’ll be helping to reduce our oil consumption - and probably making yourself healthier in the process! It’s a win-win situation.

This new practice of by-the-mile is catching on, and not just in Texas! So Texans, call your auto insurance company and ask if they offer by-the-mile payment. No matter where you live, do some comparison shopping. Using websites like carinsurancerates.com, you can find a company that will serve your needs the best, however much you drive!

Montana Car Insurance: A Quick Guide to Car Insurance for Residential and Urban

For whatever reason every state in the US has elected to establish their own set of insurance rules, and Montana is no exception. Prior to purchasing car insurance all residents should discover the precise details of their state’s requirements. In Montana residents can do this by contacting the Montana State Auditor in Helena by calling (406) 444-2040 or visiting their website at http://sao.mt.gov/.

Montana’s only requirement for its residents is that they carry liability insurance on their vehicles in case they are responsible for an accident. Minimum liability will pay twenty five thousand dollars for a single occupant’s medical expenses, fifty thousand dollars for the total medical expenses of all the occupants of a vehicle at the time of an accident and ten thousand dollars for any property damages resulting from the accident, including but not limited to those damages suffered by the vehicle of the other driver.


With medical care and auto repair costs on the rise these expenses can quickly rise above these levels. Since the insured will be held personally liable for any expenses not covered by insurance it is strongly recommended that all drivers carry more than the minimum level of insurance. It is also strongly recommended that all drivers purchase a comprehensive and collision policy to pay for the damages to their own vehicle following such an accident. Comprehensive insurance will pay for repairs up to the Blue Book value of the car; if the cost of repair exceeds this amount the vehicle may be considered “totaled” and the owner awarded the cash value of the car. For this reason many lenders require that any vehicle purchased with an auto loan carry comprehensive insurance.

Uninsured motorist insurance is also not required but strongly recommended. Many states in the US do not require that their drivers purchase liability insurance. That means that at any given point in time there could be hundreds of drivers on the road with no insurance, and any one of them could cause an accident. MT uninsured motorist insurance helps pay for medical expenses and vehicular repairs following an incident with one of these uninsured drivers or a hit and run.

Virginia Car Insurance: Regulations Made Easy

The regulations regarding the purchase of car insurance in Virginia is really very simple; for the most part there aren’t any. The only type of insurance coverage that Virginia drivers are required to have is uninsured motorist coverage, no doubt stemming from the fact that their drivers are not required to have liability insurance. This means that in the event a driver who does not possess any liability is responsible for an accident their victim will have some opportunity to pay for the necessary medical car and vehicular repairs without putting themselves into the poor house.

That said, every driver knows that it is very foolish to drive with no insurance; the cost of vehicle and medical care today is just too high. It is strongly recommended that every driver carry at least a minimum liability policy. Liability will pay for damages incurred in an accident for which the insured is responsible up to and including the amounts of twenty five thousand dollars for medical expenses incurred by a single driver, fifty thousand dollars for the combined medical expenses of all of the occupants of the vehicle and ten thousand dollars to assist with repairs to any property damaged in the accident, including but not limited to public property and the victim’s vehicle.


It is also recommended that every driver carry comprehensive coverage. Comprehensive (or collision) coverage will help pay for the damages to the vehicle of the insured up to the Blue Book value of the car that result from an accident with another vehicle for which they are responsible or from an accident caused by another source, such as inclement weather or the local wildlife. Comprehensive coverage may be required for any vehicle currently under lien.

More information regarding VA auto insurance policies may be obtained by contacting the Virginia Bureau of Insurance in Richmond by calling 804-371-9741or by visiting their website at http://www.scc.virginia.gov/division/boi/index.htm.

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Washington Car Insurance: Requirements for Car Insurance

Unlike Washington D.C. Washington state is not home to five million people crammed onto three major highways; however, auto insurance is no less important. For complete information regarding auto insurance in Washington consumers can contact the Office of the Insurance Commissioner at 800-562-6900 or by visiting their website at http://www.insurance.wa.gov/.

Washington requires that all of its drivers purchase at least a minimum liability policy for their vehicle. Liability will pay for the damages suffered by the other driver and their passengers in the event that the insured is responsible for an accident, and minimum levels of coverage are twenty five thousand dollars for medical expenses for a single occupant, fifty thousand dollars for the combined medical expenses of all of the occupants of the vehicle and ten thousand dollars for any property damage resulting from the accident, including repairs to the victim’s vehicle.


As medical expenses and repair costs can quickly rise above these limits, and the insured will be held liable for the excess, it is strongly recommended that when purchasing liability insurance the consumer choose a level that is greater than the minimum. In addition, it is strongly suggested that every driver purchase comprehensive coverage for their vehicle (if a vehicle has been purchased with an auto loan this will probably be required). WA Comprehensive coverage will pay for damages to the vehicle following an accident the insured was responsible for, and should the cost of repairing the damages exceed the Blue Book value of the vehicle the car will be totaled and the owner awarded the full cash value of the car.

With every state having a different policy on insurance requirements it is very important that all drivers purchase an WA uninsured motorist policy; this is not required by the state, however. Uninsured motorist coverage will pay for damages to body and vehicle of those persons unlucky enough to be involved in an accident with a driver who does not possess liability; it also helps those who are the unfortunate victims of a hit and run.

Are SUV’s harder to insure or more expensive?

Not only do they have a higher ticket price at the dealership and cost a mint to fill-up, SUV’s are also a magnet for high insurance premiums. On average, it costs 10-20 percent more to insure a SUV than a regular car.

So why the big increase?
More often than not, SUVs cause more damage to other vehicles when they are in accidents. Chances are that a goliath SUV will do some pretty hefty damage to a two-door convertible. This raises the payout rates for the insurance company, and therefore liability premiums increase.

Even if you are a safe and careful driver, SUVs have historically fared much better than their counterparts in accidents. This is not to say that a driver in an SUV is safer necessarily, but they feel safer. And this feeling of safety is exactly the reason why many drivers still choose to drive the behemoths. It is estimated that about 12% of all vehicles on US roads are Sports Utility Vehicles.


But SUVs aren’t without their own inherent dangers. While progress has been made in safety design and roll-over prevention in the past years, SUV’s still have a greater potential to flip during high-speed turns, in collisions, or when avoiding accidents. They sit higher off the ground, which means their center of gravity is less balanced and they become “top-heavy”. To the insurance company, rollover accidents are very costly in terms of vehicle repairs and personal medical expenses.

SUVs have also recently become very coveted among car thieves, costing millions of dollars in replacement claims. According to the Highway Loss Data Institute, the Cadillac Escalade was the most stolen vehicle in 2004. To replace the Escalade, an insurance company can pay upwards of $18k.

Repairs on an SUV are also quite expensive. Insurance companies will pay quite a bit of money towards body and engine work, even in the most negligible collision. This is because SUVs do not have to meet the bumper standards set by the federal government’s in terms of withstanding fender benders. Just a slight tap on the rear can cost hundreds of dollars.

The high risk factors of SUVs equate to a potential for high medical, liability, and settlement payments for the insurance company, and they must recoup those costs in the form of higher premiums.