When it comes to car insurance rates, Michigan, Louisiana, Kentucky, West Virginia and Mississippi are at the top of the heap for the amount paid compared to residents’ incomes.
According to data compiled by CarInsuranceQuotes.com, those are the five most expensive states for car insurance, with Michigan in the number one position. On average, the typical Michigan household pays a hefty 8 percent of its annual income for car insurance. By contrast, the typical Massachusetts household dedicates a mere 1.43 percent of its annual income to car insurance. North Carolina (1.6 percent), Hawaii (1.6 percent), Alaska (1.75 percent) and Oregon (1.95 percent) are among the most affordable states.
“We wanted to warn consumers about how much car insurance costs as a percentage of their income in the state,” said John Egan, the managing editor of CarInsuranceQuotes.com. “It also serves as a reminder that people really need to pay attention to how much they’re paying and be their own best friend when it comes to getting the best deal they can get.”
Most states require drivers to have some degree of car insurance, which is regulated at the state level. Part of the reason Michigan is so expensive is because it’s the only state that guarantees unlimited personal injury protection, or PIP. That covers the policyholders’ medical costs in case of an accident, no matter who’s at fault, said Egan. Michigan is also the only state where coverage includes unlimited lifetime medical and rehabilitation benefits.
“So, if you’re injured and paralyzed and need physical therapy or medical equipment for the rest of your life, that all gets covered by your car insurance policy,” said Egan.
Whether this is good or bad depends on one’s perspective. “If you’re an accident victim, that will pretty much save you from going bankrupt,” he said. “But opponents of the system say it jacks up the car insurance premiums for everybody. So you’ve got two sides of the issue there.”
Population size also has an impact on rates. Alaska and Hawaii, for example, have fewer accidents because they simply have fewer people on the road. Consequently, “There are fewer opportunities to have incidents that result in car accident claims,” said Egan.
The number of injury claims also factors into the equation. For instance, Louisiana–where a typical household shells out 5.5 percent of its annual income for car insurance–has a fairly large number of injury claims. “This has an effect on everybody’s rates no matter what state you live in, and that’s one of the things people really need to keep in mind,” said Egan.
For a comprehensive breakdown of the car insurance costs in all 50 states plus the District of Columbia, go to www.carinsurancequotes.com/car_insurance-costs. You can also enter your zip code and compare quotes at www.CarInsuranceQuotes.com.
Tomorrow, come back to ABCNews.com for five ways to cut your auto insurance rates.