How Your ZIP Code Drives up Your Car Insurance

Living on the wrong side of the tracks can cost you hundreds of dollars extra each year when you buy auto insurance.

Something as simple as moving from one ZIP code to another in the same city -- even if you've just moved across the street and your driving record, claims history and vehicle remain the same -- can cause your car insurance rates to skyrocket.

A comparison of auto insurance rates in a half-dozen ZIP codes in Tampa, Fla., for example, found a difference in premiums of more than $400 a year for a 40-year-old man living in a swanky suburban neighborhood of newer homes, compared with that same man living a more modest neighborhood a few miles away.

But it's not lower property values that cause insurance rates to rise.

It's not just the neighborhood -- it's the neighbors

Many factors influence your auto insurance rates, some of which you can change, and some of which are beyond your control.

Variables that impact rates include the make and model of the vehicle you drive, the demographics of others who drive the same model, how the car performs in collisions, how and when you use the car, whether you have a clean driving record and your credit score, says Chris Hackett, director of personal lines with the Property Casualty Insurers Association of America.

Even when all those factors are held steady, where you live has a pronounced impact on the auto insurance premium you pay. When setting rates, insurers "look at the (claims) history within a certain geographic area," Hackett says.

In your particular ZIP code, factors that can drive rates higher include the number of:

  • Vehicles stolen.
  • Claims for property stolen out of a car.
  • Fraudulent injury claims.
  • Reports of vandalism.

Even something like damage caused by a tornado -- anything that would generate an insurance claim - can drive rates higher.

"It all tends to affect your premium," says Frank Scafidi, spokesman for the National Insurance Crime Bureau and a former FBI special agent.

Scafidi, who lives in California, experienced the phenomenon firsthand a few years ago when the U.S. Postal Service changed the ZIP code of his home.

But his insurance rates fell.

Miles apart on car insurance

A comparison of auto insurance quotes in various Tampa ZIP codes for liability, comprehensive and collision coverage for a 40-year-old man driving a 2007 Honda Accord found the lowest rates in a more suburban section of the city at $967 a year. That compares to $1,398 for the same man living a couple of miles away in a different ZIP code.

In these ZIP codes, rates for comprehensive insurance -- which pays for damages related to theft and vandalism -- differed by only a few dollars. Drivers in the more costly ZIP code overall actually paid about 10% less for their collision insurance. The big difference in rates is due to the personal injury protection coverage required by Florida's no-fault insurance law. (See "Where car insurance fraud is a sport.")

It all comes down to your insurance company's experience with losses in your neighborhood. Drivers in areas that might have higher overall crime rates can pay lower rates if more people there use public transportation than own a vehicle, or if local drivers are less inclined to file insurance claims, Scafidi says.

The factors for your own ZIP code will be different, of course, and even in the same ZIP, rates from different insurers vary substantially. Each car insurance company does its own math and has its own claims experience in your area. That can make a major difference as you compare their rates. (See "Pocket $1,102 just by shopping around.")

How insurers rate the neighborhood

While auto insurance rates may seem to have no rhyme or reason, Hackett says insurers need to win approval from state regulators who ask how insurers arrived at those rates and ensure the rates are applied fairly.

In general, living in an urban area compared with a rural area can have a major impact on rates. In a metro area, "there's less elbow room for you," and accidents are more likely, pushing rates higher, says Lynne McChristian, Florida's representative with the Insurance Information Institute.

There also can be differences based on the nature of the neighborhood in which you live. Homes built in a newer section of a city like Tampa are more likely to have garages than homes in older, urban neighborhoods, McChristian says.

Having a car parked out in the open can increase the chances of it being stolen, vandalized or broken into. "Some of these areas might have more vehicles that are easy targets," she says.

Areas with parking garages also can be targeted because of the concentration of cars, McChristian says. That could account for the fact that Tampa's main entertainment area and its main restaurant district have the highest rates of theft from vehicles, according to Tampa police.

There has also been a recent upsurge in Florida and across the country in the theft of catalytic converters from vehicles as thieves target the precious metals they contain, McChristian says, with cars parked in the open being an easier target.

'Garaged' doesn't mean four walls and a remote

Don't let all the talk of garages above (or in insurance ads) mislead you: You typically don't get a car insurance discount for having your own garage.

"It's not normally a question asked by most car insurance companies," says Penny Gusner,'s consumer analyst.

Car insurance premiums may in fact be lower in neighborhoods where homeowners have private garages. And the garages themselves may be responsible for lower rates of theft and vandalism. But every driver in that ZIP code benefits, not just the ones with garages.

Unless you're insuring a classic or specialty car, most insurers won't ask whether you have a garage. When you are asked where your car is "garaged" at night, what they usually are seeking is your address. "They don't usually make you specify if you park in a garage, driveway or on the street," Gusner says.

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