New Jersey Now Has Nation’s Most Expensive Car Insurance

New Jersey now has the most expensive car insurance in the nation according to the National Association of Insurance Commissioners. The Association reported that the average resident of the Garden State paid $1,302 to insure a car in 2011; that was around $390 more than the national average.


It should be noted here that the Association’s figures vary widely from some of the other survey results out there. Some other surveys indicate that the average rate paid for car insurance in the U.S. is $1,500 a year. The reason for the difference is that it can be very hard to determine what people actually pay for auto insurance.

Different surveys use different criteria to figure averages, which can vary widely. Insurers charge very different rates for those who insure cars and persons of different ages. Many surveys are based on the value of a new car, and most Americans don’t drive new cars.

Why Are Insurance Rates Higher in New Jersey?

It is hard to determine why insurance costs are so high in New Jersey; the state is largely urban, and contrary to popular belief, auto insurance rates are often lower in urban areas. A spokesman for the New Jersey Department of Banking and Insurance noted that New Jersey drivers tend to buy more insurance than is legally required.

Another reason why insurance might cost more in New Jersey is that the income level in the state is fairly high. Persons with higher incomes tend to be less attentive to monthly costs like insurance and to drive more expensive, newer cars that require more insurance. Higher income families are also more likely to own several vehicles, which can raise insurance rates even more.

Tony Soprano now has some of the nation's highest car insurance rates.

Tony Soprano now has some of the nation’s highest car insurance rates.

State law also plays a role; New Jersey may require more coverage than some other states. Michigan has very high car insurance rates because its state law requires higher payments to injured drivers than other states.

The Association’s figures are also certainly out of date because they’re three years old. Among other things, the figures are not adjusted for inflation and changes in the law.

Dividends Can Reduce Insurance Costs

One interesting point that a number of journalists covering increased insurance rates in New Jersey noted that the Association didn’t account for was dividends in its math. There are two different kinds of insurance companies in the U.S.: mutual insurance companies, which are owned by the policyholders, and stock corporations, which issue stock.

Some mutual insurance companies pay dividends to policyholders; the dividend can take the form of a direct payment or a discount on the premium. Either method can reduce the cost of insurance.

The Association didn’t take dividends into account in its math because many insurers don’t offer them and the amount of dividends can vary widely. This is another example of why it is so hard to determine car insurance costs on a nationwide basis.

Vehicle owners should remember that there is only one car insurance figure that really matters: the amount you pay for auto insurance each month or year. You should be concentrating on what you pay for insurance and not what other people are paying.