How & Why Insurance Can Vary By State

We all know that when we move we have to let our insurance companies know and see how that will affect our rates. But, have you ever stopped to wonder why this is? Well, we’re going to break it down for you a little here. Let’s first look at homeowner’s insurance policies.

Homeowners: This can vary state by state due to how prone your area is to natural disasters and environmental risks. For example, if you live in Kansas versus New Jersey you will have to get a policy that specifically covers this type of high-risk disaster. Here are some things that will affect how much your homeowner’s coverage costs.

1. Climate and weather in your state

2. Location of your home and environment. For example, is it located in a flood zone?

3. Materials the home is built with

4. Value of the home

5. Age of the home

6. Age of plumbing and roofing

7. Type of policy you choose

Now let’s take a look at auto insurance and what effects this coverage state-by-state. Here is a list of things that can affect your premium when you move.

Auto Insurance:

1. No-fault state versus fault state: No-fault states will cost you more for car insurance because they require additional forms of coverage, such as personal injury protection.

2. State minimum coverage requirements: Some states have higher minimum liability coverage requirements, which will cause your premium to increase

3. Geographic location: Let’s consider your move from a suburb to a metropolitan area. This can cause your rates to increase due to increased rates of auto crime.

4. Drive commute: If you’re commuting to work more in your new state, your policy will likely increase

All of these factors will affect your premium by state. Unless you live in New Hampshire, of course, because this is the only state where auto insurance is not legally required.

Now, let’s take a look at life insurance. Every state has its own rules and regulations on life insurance policies too. These necessarily won’t affect the pricing but it does affect other important things.

Life Insurance:

1. Free look period: This is the time you can still change your mind, so to speak. It’s a time when you can decide to cancel and receive a full refund. This is usually a very short time after the policy has been purchased and will vary by state slightly

2. Grace period: Let’s say you miss a payment. It just slipped your mind this month. The grace period is what allows you to make this mistake without a lapse in coverage. How many days you get for this to happen will depend on the state you live in but it is usually a standard 30 days

3. Incontestibility period: Some states have contestability, which allows life insurance companies to contest a payment for any reason. The incontestability period is there to protect the policyholder and allows for no contestability after someone has owned the policy for a certain time. For example, let’s say you have had your policy with a life insurance company for 3 years, chances are that if you die, you’ve already reached your incontestibility period and they won’t be able to challenge the payout for any reason

4. Payment guarantees: It’s scarce for life insurance companies to go under. But, some states will guarantee that you receive your payment even if this happens. The state will cover up to a certain amount of the death benefit and sometimes the cash value

5. Timely payments: Some states require a timely payment to the beneficiary from the life insurance company. Most times this isn’t necessary as they want to pay out quickly to avoid paying interest

This state-by-state case of insurance was founded in 1945 by the McCarren-Ferguson Act, which overrules federal laws because state regulation and taxation of the industry are in “the public interest.” This is why each state has its own set of rules and laws. We hope this article helped you understand why insurance rates will vary by state.