If you are shopping for auto insurance, where you live can make as big a difference as how you drive. No matter how good your driving record, if you live in a high-cost insurance state you will end up paying more than folks living in lower cost states.

Insure.com recently came out with a list of states with the highest and lowest average auto insurance rates in the United States. At the top of the list was Louisiana which clocked in with an average premium of $2,510.87, far higher than any other state. At the bottom of the list is Ohio, Vermont, and Maine, each of which have average car insurance rates of under $1,000 a year.

The study, performed by Quadrant Information Services for Insure.com, looked at costs for insuring more than 2,400 cars from six large insurers across 10 zip codes in each state.

While it’s generally thought that states with the most urban areas have the highest insurance rates – more cars on the road mean more accidents and expensive insurance claims – this is not always the case. A bigger factor is the states’ different insurance laws.

In Louisiana, rates are sky-high because more cases are settled out of court with expensive settlements. This happens because of a state law that limits jury trials to only those cases with claims above $50,000. Similarly, in Michigan, which ranks second in car insurance costs, state law guarantees unlimited medical benefits for accident victims for life. This inevitably increases insurance costs in that state.

Rounding out the 10 most expensive states are: Oklahoma, Montana, California, South Dakota, Washington, D.C., Georgia, Illinois, and Connecticut. In addition to the three states under $1,000 previously mentioned, the other cheapest insurance states include Wisconsin, New Hampshire, Iowa, Massachusetts, North Carolina, Arizona, and Tennessee.

The Bottom Line: due to factors beyond your control, car insurance will cost more in some states than others. No matter which state you live in, you can always get the best possible price by shopping around to instantly compare car insurance rates.

photo credit: Fabio Aro

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In an accident, under no fault laws, your auto insurance company will pay for your damages (up to your policy limits), regardless of who was at fault for the accident. Any other drivers involved will be covered by their own auto insurance policies. Under a pure no fault system, drivers would be completely covered by their own policy, and would be barred from ever suing another driver for damages.

However, no state uses a pure system. Instead, all “no fault” states actually use parts of both the no fault system and the standard liability system. Under a standard liability system you’re financially responsible for the cost of damages you cause.

Currently, only 12 states employ the no fault system. Obviously, it’s a good idea to understand your state’s requirements before you shop for insurance as Florida car insurance is very different from California car insurance which is very different from Texas car insurance and on and on.

No Fault Auto Insurance Policy Basics

The actual no fault part of your auto insurance policy is usually called personal injury protection, or PIP.  Different states’ PIP packages cover different things, but in general benefits will include most injury-related expenses. The most common benefits are medical costs, loss of wages, compensation for loss of services, funeral expenses, and death benefits.

The amount and type of PIP required varies from state to state. In some no fault states drivers can actually choose whether or not they want to purchase PIP and drive under the no fault system. (If not, they operate under the standard liability, or tort, system.) Because no state is pure no fault, drivers can always be held financially responsible for the cost of injuries they cause in certain circumstances.

Some states allow injured parties to sue if their injuries meet certain standard for severity, while others allow it when total costs reach a certain dollar level. That’s why liability insurance is still so important, and why every no fault state requires it.

The Goal of No Fault Auto Insurance

No-fault insurance has the goal of lowering premium costs by avoiding litigation over the cause of the accident, while providing quick payment for injuries. However, critics of no-fault insurance note that it does not punish reckless or negligent drivers in litigation and that it is particularly difficult to sue if a person’s injuries leave them with a handicap. Proponents of no-fault insurance point out that auto accidents are inevitable and that at-fault drivers should therefore not necessarily be punished. Additionally, in regions with high numbers of uninsured motorists, the at fault party often does not have resources to pay their liability, leaving the accident victim with nothing.

Pros and Cons of No Fault Auto Insurance

Under current no-fault laws, motorists may sue for severe injuries and for pain and suffering only if the case meets certain conditions. These conditions, known as a threshold, relate to the severity of injury. They may be expressed in different ways such as verbal terms or in dollar amounts of medical bills.

Some laws also include minimum requirements for the days of disability incurred as a result of the accident. Because high threshold no-fault systems restrict litigation, they tend to reduce costs and delays in paying claims. Some states offer a no fault system (Example: Connecticut auto insurance policies are required to comply with the State of Connecticut’s no fault laws just like Ohio auto insurance policies and policies in the 10 other no fault states) and others offer a combination of no fault and liability.

While there are pros and cons of each system, knowing what your state offers can help if you are ever in an accident.

Finding very cheap car insurance is not as difficult as you might think. Here are five tips to help you save money:

1. Increase your deductible. If you have an older car and are comfortable with the idea of potentially paying more out of your pocket in the event of an accident, increasing your auto insurance deductible can be a great way to save money. In many cases, the money you save on your policy will more than make up for the increased out-of-pocket costs that you may incur if you crash or have a theft.
2. Check your car model. The type of car you drive has a big impact on your insurance costs. The Highway Loss Data Institute maintains a database of the insurance costs of every car make and model. Even small differences in models like a 2 door vs. a 4 door can make a big difference in your auto insurance rate. If you are thinking about buying a car, researching the costs of insuring your vehicle before you buy it could save you a lot of money.
3. Bundle your insurance. One way to get really cheap car insurance is to maintain your auto policy with the same insurer that you use for your homeowner’s policy. Insurance carriers often give significant discounts for customers who have more than one policy with them. Likewise, if you own more than one car, keeping both policies with the same auto insurance company should save you money.
4. Ask for discounts. Most auto insurers have a variety of discounts available, but in many cases you have to ask for them. If you have a clean driving record you should be able to get a good driver’s discount. If you don’t drive your car very far each year, you should be entitled to a low mileage discount. One way to get cheap car insurance for young drivers and teenagers is to maintain a good grade point average. Students who maintain high GPAs are viewed as more responsible, lower risk drivers and can often get a discount on auto insurance.
5. Shop around. Perhaps the single most important thing you can do as a consumer to save money on your auto insurance is to compare rates from multiple companies. Each insurer has a different focus and different rules when it comes to insuring drivers. Some insurers will shun high risk drivers while other companies specialize in this. With so many car insurance companies, there’s no reason not to compare rates from at least three to five insurers.

If you follow these tips you could be saving hundreds of dollars on your annual auto insurance policy. So stop paying too much for car insurance and start saving.