Car Insurance Savings without Moving to a New ZIP Code

Most of us would like to believe that the premiums we pay for a car insurance policy are determined by things that are under our own control – things like the model of car we choose to purchase, how far from our jobs we live, and our own individual driving records. In the complex world of car insurance, however, some factors that can influence price are largely out of the control of the average person. One of these is the ZIP code where you live.

Granted, in a technical sense, people can indeed control where they live, but in the real world in which we all live, it is often not practical to change residences in order to secure a lower car insurance rate. Such a move might involve selling a house – and in the current economic climate, that can mean selling at a significant loss if, indeed, it is possible to find a buyer at all. Even if a move only means changing apartments, that is still an enormous undertaking.

Most people, therefore, can rightly regard a ZIP code pricing penalty as something that really is out of their hands. How does such a penalty affect them? In many areas of the country, it can mean significantly higher car insurance rates – though in other areas, pricing according to ZIP code of residence is actually disallowed by state regulators. In areas where ZIP code pricing is allowed, the “penalty” can be considerable. Residents of one street may be charged a significantly higher premium than people just one street over – because those people live in a different ZIP code.

Is ZIP Code Pricing Unfair?

Good drivers paying a higher rate than neighbors in another ZIP code would answer yes, but there is actually a valid business rationale for these pricing models. Insurance companies are in the business of assessing risk, and like it or not, if you live in an area where the behavior of others puts your car at greater risk, that can legitimately be a factor in how much to charge you for a policy.

Risk factors can include such data points as the rate of stolen vehicles in your ZIP code or the number of claims that arise from incidents of vandalism. Unfortunately, fraudulent behavior toward insurance companies themselves is also a risk factor in some neighborhoods. If owners of vehicles registered in your ZIP code have a higher rate of claims for suspicious and possibly fraudulent injuries, it can affect pricing structures. The same is true for claims of property stolen from a parked car. How is an insurance company to know if such property was truly in the car to begin with? In some cases the evidence is sketchy and fraud is suspected. These cases can help to build a neighborhood profile that leads to higher premiums for everyone living in the vicinity.

Apart from a possibly costly move, the only thing consumers can really do about ZIP code pricing is to look for car insurance quotes online since different companies use different premium strategies. You may find one offering a policy at a considerable saving over what you are currently paying.