How Moving to a Big City Increases Motoring Costs

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Relocating to a big city is very exciting for many people. There are many opportunities to meet new people, a lot of places to eat, go and enjoy and plenty of job opportunities. In metropolitan areas people have to share the limited spaces with millions of others. Roads are full of cars and streets are full of pedestrians. Even a careful driver can end up in an accident due to others’ mistakes and suffer insured losses.

This likelihood of losses auto insurers may suffer forces them to demand extra premiums. The idea is that whoever causes the largest losses whatever the reason must be the ones who pay proportionately extra premium. This logic is well applied to city drivers. As a result, everyone’s premiums are increased at a certain ratio to pay for the damages occurred in the immediate area. So, good drivers see rate increases when they move to cities. The bad drivers see a lot more jump in their vehicle insurance rates.

Essentially the base rates would be the same everywhere. They would start changing when the statistical loss data is included in the calculations. It is beyond imagination that carriers would pay all the losses out of their very little profits. They would have to pass these losses to policyholders in a fair fashion. It would not be fair to ask country drivers to pay for the losses suffered out of their areas. Unfortunately, car insurance in zip codes within city limits are higher because of these factors.

How much moving to a big city can affect the premiums?

According to studies carried out in California the difference can be substantial. They looked at a single male driver who is looking for standard coverage for a popular mid-size car, with around ten years of experience, moderate yearly mileage and no claims or adverse driving records. Their findings show that the premium would be around $1,400 in a rural location in the state. If the same person moved to downtown Los Angeles the premium would shoot up to $2,400. Over 70% increase is just about right as an indication for similar moves.  

When you look at demographic figures the reason for the increase becomes apparent. A small rural community would have around ten thousand people living in a wide area. The number of people would be in the millions in a city like Los Angeles. The car crime rates would be much higher in Los Angeles to a point that insurers see it as “Loss” Angeles. They end up paying a lot more for accidents and injuries.   

Furthermore, everything from hospital bills to auto repairs would be much higher in the cities due to high premises rent and wages. Unless you are earning considerably more the cost of living which includes insuring a vehicle would make it harder to survive in these parts of the country. Therefore, it is not difficult to work out that low-income families would suffer more because of the increased insurance costs.

Good and bad driver analysis

According to California laws companies doing business in the state should consider three major factors before they can apply other factors into their calculations. These factors are driving records, annual mileage and years of driving experience. This does not mean that they cannot charge for clearly much higher likelihood of paying claims. However, it shows how important driving history, vehicle usage and experience are in the premium calculations.

If your rates are already high before the zip code related losses are taken into account you would be in for a bigger surprise. Premiums could be a serious burden for motorists and households in metropolitans to a point that they may just have to make do with one car whereas they are more relaxed with the number of vehicles they keep.