First, a Warning

Don’t confuse the cost of insurance alone with the cost of owning a car. Rather, paying more for insurance could actually save you a lot of money. Someone who pays a lot might have better coverage, which saves you a financial crisis if you should get into a bad collision. One of the reasons some states have such high rates is because they mandate a higher level of coverage than other states. They do this for a reason: to protect their citizens from being bankrupted by a crash.

In Michigan, costs are partly so high because the state requires that medical coverage be unlimited for life, meaning that if someone is permanently disabled in a collision, the insurer could wind up paying their bills for tens of years. Companies charge more to take on that risk, but Michigan legislators believe it is an important protection for people in their state.

Louisiana has problems with its legal system that send insurance prices through the roof. Claims resolutions are simply too expensive, and it hits consumers in their premiums.

The 10 Most Expensive States and Districts

1. Louisiana (the most expensive state in the country)

For many drivers having their cars insured is a necessary evil that they aren’t quite happy to live with. The mandatory status of this type of insurance makes a lot of people believe that they are paying their money for something they don’t really need. This seems especially unfair for people who never had insurance situations and didn’t use their insurance coverage, although they are paying for it on a regular basis. Premiums may rise and this also adds some fuel to the fire of dissatisfaction among customers, with some of them choosing to drop insurance altogether and drive uninsured. There’s no point in reminding that such decisions could cost you much more than you would save by dropping coverage, since you may face fines, license suspension and time and custody, not to mention that you’ll have to pay for everything out of own pocket in case of an accident. But is there another way to cope with insurance costs if you feel they aren’t adequate and should be lower? Of course there is, and it doesn’t require much effort from your side.

During the years of the last century following the Great Depression, many employers offered their employers welfare benefit and retirement plans, most recently regulated under the Employee Retirement Income Security Act of 1974. This was an example of a more compassionate approach with employers accepting that wage levels were low, often not providing enough opportunity to save for retirement. They therefore deducted a small percentage of pay during employment and invested it through a fund used to pay benefits. In some cases, the fund also bought life cover. The effect was to provide some security to the employees when reaching retirement age and providing enough to pay funeral and other expenses later on.

While the economy was doing well, most of the larger corporations and public employers were able to maintain a good flow of investment income into these funds. Indeed, so successful were many of these funds that employers took to borrowing money from the trustees rather than from their banks. In many cases, the trustees reported that this would leave a shortfall in the funds in the future. Employers were always quick to promise repayment should that shortfall become more likely.

This is not like buying a car. When you are shopping around, you never intend to keep the vehicle for more than a few years so, if you make a mistake, it’s something you can put right as soon as your family finances allow you to trade in the first for a better replacement. But when you are looking at the possibility of buying insurance for your life, this is something you may keep for a long period of time. The problem is easily stated. What may look a good deal during your twenties may not look such good value as you pass your eightieth birthday. We can always be wise after the event. The question is how to make the best decisions when the future is uncertain.

Back in June 2010, a special-interest Proposition 17 appeared on the ballot papers. It was pushed through the electoral process by Mike D’Arelli of the Alliance of Insurance and Brokers. Before it got on to the ballot, there was a court case – a rite of passage for anything affecting consumer rights in California. Both the “for” and “against” camps pushed for changes in the wording of the proposition and of the rebuttal. Judge Allen Sumner tweaked the wording on both sides leaving no one satisfied, but the Proposition went to the voters. There was a major advertising campaign paid for by Mercury Insurance. It’s estimated it provided a war chest of $16 million. There were ads everywhere and, when the dust had settled, the Proposition was defeated by 52 to 48% – not the most convincing of rejections. So what’s the issue?

If there was a truth drug we could secretly administer to all politicians, you would almost certainly hear them agree the current health care services are broken. The reason is easy to state. As it stands, doctors and hospitals operate under the fee-for-service system. This gives them a direct financial incentive to do more work than may be strictly necessary. Even though they may explain everything to the patient and get “informed” consent, not all the tests are strictly necessary and many of the procedures they recommend have little chance of improving patient outcomes. So the best way to improve health care in this country is to change the incentives. Instead of paying for more care, we should be paying for better quality care.

Yet if you look at the proposals made by Rep. Paul Ryan, the Republicans are now committed to changing the cost base of health care. In particular, they want to change the entitlements our seniors have under Medicare. It’s undoubtedly true the service is buckling under the rising burden of spending. Way back in 1965 when we created Medicare and Medicaid, the government spent 2.6% of its budget on health care. Last year, our government spent 26.5% of its budget on health care. If you look at the projections published by the White House, President Obama is projecting this will rise to 30% by 2016. To give you a context, the projected spending on our defense is only 20% of the budget. Just think, all those weapons and people, fighting wars in Iraq and Afghanistan. Something has to be done to bring costs under control.

Insurance is all about the numbers. If the evidence proves there’s a higher risk, you pay a higher premium rate. This can be a judgement about the quality of your driving. Perhaps your eyesight is poor or you are epileptic. Whatever the reason, you are potentially dangerous on the road and, if the insurance company discovers this fact, it will either cancel your policy or demand you pay an extravagant premium. More often, the problem is with the vehicle itself. It may be a target for every car thief in your neighborhood, or it may roll over if you corner too fast. The actuaries collect details of every recorded accident and can tell you which makes and models are most likely to be totaled and why.

It’s such a headache when you have to renew your policy or pay the premiums to have your car insured. If you had the “luck” of getting an expensive policy in the first place then this process is certainly quite unpleasant for you. Paying money for what you feel is over-priced can make you think that you’re wasting your money on something you don’t really need. And this in turn results in some drivers dropping their policies altogether, driving without insurance and ending up paying all the costs out of own pocket in case of an accident. If you think that you are special and can’t have an accident because you’re good driver we have bad news for you – there are millions of drivers out there just like you who think they can handle it but still accidents take place every few minutes on US roads. And you might end up in one of those regardless of how good you are behind the wheel.

When the insurance industry sets out to calculate the premium rates, it does it scientifically. This is like a military operation. Teams of dedicated workers travel the land and the internet, collecting every piece of information from anyone who may know about traffic accidents. This starts with the law enforcement agencies. People report accidents and make statements about who was to blame. Ambulance crews attend the scenes. Hospital staff and doctors see the injuries. Body shops and mechanics see the resulting state of the vehicles. Policyholders submit claims and some of the cases come to court where witnesses give evidence under oath. These teams have been collecting this information since the insurance industry first began to insure people as they moved around the country. This long ago stopped being a mountain of data and became an Everest. In all this data, there’s one outstanding fact obvious to all who take the time to analyze the facts. Women drivers are consistently more likely to drive safely. They have fewer accidents. The accidents they are involved in are less serious because they are driving more slowly. These are the facts. What should we do about them?