The question of geography always gets the most impact when you look at the way the insurance industry uses the ZIP codes. These are small areas of towns and cities and only small numbers of people live there. But if there is crime or social problems, the insurers are likely to increase the rates. This is a penalty imposed on everyone living in that neighborhood and, worse, it ignores the individual safety records of the drivers. Everyone is penalized simply because of their address. One of the possible interpretations of his practice is that it is racist in effect if not in intention, i.e. because people of different ethic or racial groups tend to live together in communities, they can all be victimized by stereotyping. That's why California changed the law to require insurers to assess risks without relying on the ZIP code as one of the key factors. Sadly, the rest of the states have been slow to follow California's lead.

But this focus on ZIP codes tends to hide an equally interesting difference in premium rates. Just as two identical families who live across the street from each other may pay different rates based on the ZIP, so two families living on different sides of the state border may also be paying rather different amounts. So let's assume the same type of coverage and similar driver characteristics, if you want the best rates, you should relocate to the Midwest. The states with the cheapest rates are Iowa, Wisconsin, with North and South Dakota coming in third and fourth. Comparisons are always a little difficult but, if we go back to 2001, the national average for insurance was $817 per year for liability, comprehensive and collision coverage. In 2007 as we entered the top of the boom years, the national average had fallen to $795. Since then, the rates have been creeping up. We are currently over $900. Now the contrast. If you live in Iowa, the insurance package is likely to cost you around $600. Live in Louisiana and you are likely to pay more than $1,200.

In part, this is fixed by the number of drivers. If you live in one of the more densely populated states, say in the Northeast, your risks of an accident are higher. You are richer and so buy more new vehicles, so your premiums are higher. Live in thinly-populated countryside, the risk of you seeing another vehicle may be high but hitting one of them is rare.

So now you know the situation, here's the problem. No one is allowed to buy cheap auto insurance from across the border. States license insurers to sell policies within the borders. It creates a monopoly for those registered and excludes effective competition from outside. If you rent your home, it may be worth your while to move across a border. The extra few miles of a commute may still be a big saving when it comes to the insurance premium rates. If this is not practical, and who would want to relocate just for this, get the maximum possible number of auto insurance quotes to find the best possible deal within your own state.