With high prices at the pump and the ever-present need for regular auto maintenance and repairs, Americans are frustrated with how much it costs to drive these days. Car insurance is just one more thing that drivers have to worry about, and in many states you'll pay an arm and a leg for coverage. Yet going without insurance is illegal and carries major financial risks if you're in an accident.
Some states, however, have managed to stem the tide of rising insurance costs and offer their residents the lowest rates in the nation. Earlier this year, Insure.com looked at every state's insurance market to figure out which gave drivers the best bargains. Here are the five cheapest states on its list.
Drivers in Iowa pay an average of $1,058 for their auto insurance each year. That's consistent with the state's reputation for low car ownership costs generally, as the state topped the Bankrate list of cheapest places to own a vehicle. Insurance costs played a major role in that survey, with a slightly different methodology leading Bankrate to name Iowa the cheapest insurance market in the nation. But rock-bottom repair costs also had a hand in the results, offsetting the higher costs of gasoline that living in a rural state usually entail due to longer car trips.
Idaho edges out Iowa for the No. 4 spot, with an average car insurance rate of $1,053 annually. Like Iowa, Idaho has the advantage of being sparsely populated, with the rural nature of most of the state helping to keep the perils of city driving to a minimum. One report from the National Association of Insurance Commissioners found Idaho's costs to be the lowest in the nation, again using a slightly different methodology from the Insure.com study but confirming the relative affordability of insurance for state residents.
3. New Hampshire
New Hampshire is one of just three states to break the $1,000 barrier for car insurance costs, weighing in at $983 for the typical driver. Yet the New England state was actually found to be the most expensive in which to insure teenage drivers, with rates more than doubling when families add a teen to their car insurance coverage. New Hampshire is one of three states in which insurance giant Allstate is testing its Drivewise car-monitoring smartphone app, as it seeks to keep up with insurance rivals collecting more information on their drivers. By learning more about what behavior leads to greater accidents, insurance companies hope to roll out similar programs across the nation to produce similar savings.
In Maine, car insurance runs an average of $964 per year. With a small population and relatively few urban areas, Maine doesn't encounter the traffic snarls that plague much of the country and lead to the minor accidents that jack up insurance rates elsewhere. In addition, Maine's legal system is notorious for having juries that avoid awarding big verdicts, and low rates of auto theft also keep premiums down.
Ohio tops the list of cheap car insurance states, sporting an average premium of just $926 annually. In some ways, Ohio's presence in the No. 1 slot is a surprise, given its extensive urban areas and high population. But insurance regulation in Ohio helps keep premiums down, and a heavily competitive insurance-company network featuring hundreds of different car insurance providers also leads to lower rates for drivers. Amazingly, those measures have kept average auto insurance expenses flat compared to what drivers paid 12 years ago.
If you live elsewhere, the prospect of paying these low rates for car insurance might look very appealing. Yet even these reduced costs present a challenge to many drivers, especially in parts of those states where high unemployment rates and low wages make it tough to make ends meet. Still, insurance regulators and other policymakers could learn some lessons from the ways in which these five states keep their costs down, and make them more manageable for their drivers.
Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.