Insurance and the Cost of Living: Auto Insurance

Everyone loves to compare the affordability of different cities, and most of the attention gets focused on differences in housing prices and rents. Clearly, these are a major component of living costs, and they vary substantially across the nation.  But as we’ve regularly pointed out at City Observatory, transportation costs also vary widely across cities, and some places that have somewhat more costly housing also have more compact development patterns and less sprawl, and therefore enable their residents to spend less on cars and gasoline for transportation. These differences can create a significant impact on the overall cost of living across cities. We’ve computed the difference in city living costs in our Sprawl Tax report .

There’s another important component to differing living costs across the nation that we think deserves additional attention: insurance costs. Nearly all drivers and the majority of homeowners carry insurance on their cars and homes. Insurance premiums vary widely across the US, based on differences in crash rates, losses to natural disasters, and state-to-state variations in legal standards (as well as other factors). Today we’re going to start looking more closely at these variations—we’ll start with differences in car insurance costs, and tomorrow, look at home insurance.

Car insurance is a requirement for many people living in auto-dependent places. Wide sprawling metropolitan areas often require more miles to be driven for commuting. We are curious about the role that insurance plays in relation to the cost of living. When a car is required to commute to work or the store, insurance is a necessity to protect yourself and the car. The price of insurance is dependent upon one’s personal background as well as the makeup of one’s setting. Location plays a major role, whether it be state policy, natural regional differences, or the composition of the insurance pool around you. Insurance can become a vital and costly expense for Americans. The magnitude of that expense could severely influence the way we view the overall cost of living across major cities. 

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