Your Car Insurance Rates Will Vary By the Neighborhood You Live In

You’re probably aware that your homeowner’s or renter’s insurance rates depend largely on where you live. After all, an apartment in the inner city is more likely to sustain an insurable loss than a farmhouse in the middle of nowhere. Even a home in a nice, suburban neighborhood poses a greater risk to insurance companies than a rural dwelling, since mere population density has a significant impact on the likelihood of fire, theft, or other incidents that would result in insurance claims. But did you know that where you live also has an impact on your auto insurance rates?

Think Of Things From The Perspective Of Your Insurer

When asking yourself a question about insurance, it’s helpful to view things from the perspective of an insurance agency. The agency’s goal is to take in more in premiums than they pay out in claims - thus, making a profit. Therefore, the greater the likelihood that you’ll file a claim, the higher your insurance premiums will be. Whenever you subject the insurance company to more risk, you will have to pay to compensate them for that risk.

Now think about your car. If you drive it on crowded city streets every day, are you more or less likely to get in an accident than someone who drives ten miles on a country road without ever seeing another vehicle (except maybe a tractor)? Are you more likely to have your car stolen or broken into if you live in an area with a history of high crime rates, or on a street directly across from the county police?

Insurance companies gather data from police reports and prior insurance claims in order to estimate the likelihood of insurable losses, and thus it will cost you more to insure your car if you live in a neighborhood in which there have been more crimes committed and claims filed - it only makes sense.

Redlining - It’s Immoral And It’s Against The Law

But insurance companies tread a very fine line by determining car insurance rates on the basis of residence. Insurers must defend their rate plans to state regulators in order to ensure that they’re not engaging in “redlining,” an illegally discriminatory practice. In the past, unethical insurance companies would literally draw red lines on a map to identify the neighborhoods in which they refused to do business, and typically, these decisions were based on the racial makeup of the residents.

Even today, some consumer advocates insist that redlining still takes place, which is yet another reason why it is so important to comparison shop for your insurance. Always compare the packages offered by at least three to five insurers to find the best deal, and if you feel that you may have been the victim of redlining, contact your state’s insurance commissioner.

Normally, regulators love to go after insurance companies that are engaged in illegal operations, and racially discriminatory insurance firms certainly deserve to pay a price for their transgressions, or be put out of business altogether. Every driver on America’s roads has a legal obligation to have at least a minimal form of auto insurance, and likewise, every American has a Constitutionally enshrined right to equal protection under the law.