The lowest car insurance premiums in the nation are in Maine. The average resident of that state pays around $730 a year for car insurance, while the average American is now paying around $1,500 a year.
Why do the residents of one small New England state pay so much less for auto insurance? The prevailing evidence says they should pay more because Maine is a rural state, and rural residents generally pay more for insurance than urbanites.
The real key to Maine’s low auto insurance rates is the state’s laws. The major law that keeps auto insurance costs low in Maine is one limiting liability, or the amount that motorists and insurance companies have to pay out in case of an accident. Maine is actually one of the few states that impose serious limits on accident liability.
Liability the Key to Lower Car Insurance Rates
The biggest factor in driving up car insurance costs is bodily injury liability, or payments to those injured in accidents. In Maine, these costs are capped at $100,000 per accident, no matter how people are involved. That means payment is limited to $100,000; in most states, the driver and every passenger in the car can sue you for more.
If only one individual is involved, the bodily injury liability is limited to $50,000. Maine also limits the liability for uninsured and underinsured motorists, one of the biggest costs, to $50,000 per individual and $100,000 total. Maine also limits property damage liability to $25,000 and puts a $1,000 cap on medical payments related to insurance.
These efforts to limit liability are what keep Maine residents car insurance rates so low. The states that make little or no effort to limit liability, such as Michigan and Louisiana, have the highest car insurance premiums in the nation. In Michigan, where accident victims can sue for almost unlimited amounts of bodily injury liability, the average resident pays $2,500 a month for car insurance.
To be fair, there are some other reasons for lower car insurance premiums in Maine. The low cost of insurance means there are fewer uninsured drivers on the road, which limits costs. When there are more uninsured drivers on the road, their share of the costs has to be covered by insured, which drives up premium costs.
Restrictive Traffic Laws Help
Maine also has some of the nation’s most restrictive traffic laws. For example, persons under 18 are not allowed to carry passengers or to be on the road between midnight and 5 a.m. This reduces costs because persons under 18 get into more accidents and file more insurance claims.
Maine has also had historically low-speed limits, but those are being raised. Maine is now the only state east of the Mississippi that has a stretch of Interstate highway with a 75 mph speed limit. It’ll be interesting to see if that raises insurance costs in the state.
Despite the traffic laws, the principal factor in Maine’s low car insurance rates appear to be the limits on liabilities. One would hope that politicians in other parts of the country might learn from Maine and impose similar limits.
Until they do, citizens will have to rely upon their own wits to find the lowest car insurance rates. One of the best ways to do this is through comparison shopping for car insurance.