Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer

UPDATED: Jul 14, 2021

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In a nutshell...

  • Insuring your car in one state when you live in another is called rate evasion
  • You cannot get insurance using an address in another state or even another county
  • Insurance companies may refuse to pay claims or even drop your coverage if you engage in this practice

The cost of car insurance can vary drastically from one region to another. In fact, people in Detroit, MI, will pay eight times more for the same coverage when compared to residents of Montgomery, AL.

Before an insurance company can determine your premium, they have to know where you live and where the car is housed.

Find the best rate possible by using our free comparison tool. Enter your zip code above to get started for FREE!

Drastic Price Variance by State

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When looking at insurance premiums that are averaged out across a state, you can even see stark differences between neighboring areas.

While Louisiana is the fourth most expensive state in the nation, neighboring Mississippi comes in at number 26 with much lower rates.

Another stark difference is seen between Pennsylvania and New York. While drivers in Pennsylvania rank number 16 with average insurance premiums of $841, people in New York are in the number three spot with average rates of $1,181.

This includes:

  • Your driver’s license information
  •  VIN for your vehicle
  • Social Security number
  • Date of birth

People who want to insure their car in a cheaper state will have to register their vehicle in that state, as well.

New York City is facing a growing problem with out-of-state registrations as people shift their car insurance to nearby states so that they can pay lower rates than their neighbors.

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The Problem with Fraudulent Registrations

A fundamental principle of insurance lies in determining accurate risk levels based on a range of information.

When people give the company false residency information, the company is unable to collect the proper amount of premiums for an area.

However, the risk for that given area will not fall any lower. In the end, this can lead to higher rates across the board for all drivers.

States also face a loss of revenue as the vehicles registered out of state are giving their tax payments and fees to another state.

The goal is to deter people from committing rate evasion so that the insurance companies can accurately assess risk and set premiums and the state can collect the appropriate amount of dues through registrations.

The Risks Associated with Rate Evasion

When you sign up with your insurance company, they trust that you’re providing them with accurate information.

If they discover that the car is actually garaged and driven in another state, then they may refuse to cover claims if you’re involved in an accident.

Rate evasion is considered insurance fraud, and it is a crime.

However, you don’t have to use an address in another state to be guilty. Just giving an address in another county also constitutes rate fraud, and it’s considered a crime.

If rate evasion is suspected, they may do a public record search to find out where your utility bills are going or what your work address is.

The worst penalty actually isn’t denied claims. Some states are calling for prison time in an effort to stop this practice.

Driving Up Rates Everywhere

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Insurance companies look at a range of risk factors, including a car’s typical location. In a big city, the risk of accidents, theft, and vandalism are higher. The rates will reflect this simple fact.

When a person registers their car in an area that’s known for less crime and fewer accidents, the tracking numbers are skewed.

Over time, it will start to look as though Pennsylvania is facing a problem with accident and vandals, even though this isn’t the case. As a result, the premiums for Pennsylvania residents will start to creep up.

Parking tickets also go unpaid because the drivers are harder to track down, and this leads to shrinking revenues for the government. Again, the losses are ultimately passed back out to the people who are following the rules and registering in the appropriate state.

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Shopping Around: A Better Option

Shopping around is a better option when it comes to lowering your insurance rates.

People with a clean driving record can easily find coverage elsewhere, and you can use your pristine record to garner attractive discounts.

Even people with a few dings on their record can save on insurance if they use a comparison tool to identify better rates with competing providers. Enter your zip code below to get FREE car insurance quotes today!