What’s Cheaper for Auto Insurance – Texas or California?

Last Updated on November 24, 2020

Texas and California are the two most populous states in America. They’re also two of the most expensive states for car insurance.

Both California and Texas routinely rank among the top 10 most expensive states in America for car insurance. But which state is more expensive for car insurance? Will you really pay more for car insurance in suburban Houston than downtown San Francisco?

Is Car Insurance Cheaper in California or in Texas?Typically, Texas has slightly cheaper car insurance than California. However, as with all car insurance comparisons, prices depend heavily on your driving history, demographic data, location, and other factors.

Table of Contents:

Texas Has Slightly Cheaper Car Insurance than California

Statewide, drivers in Texas tend to pay slightly cheaper rates for car insurance than drivers in California – although the difference is small and quickly narrowing.

Car insurance premiums vary widely throughout the United States. Each state has its own unique insurance laws.

Some states have low minimum insurance requirements, which makes car insurance relatively cheap.

Other states have high insurance requirements or no-fault insurance systems, which tend to be associated with higher insurance costs.

Even within a state, there can be considerable fluctuations in car insurance prices. Drivers in urban areas, for example, almost always pay higher rates than drivers in rural areas. This is doubly true if the urban area has higher traffic, accident rates, crime rates, and other factors that drive prices higher.

Based on all of these factors, drivers in Texas pay slightly lower rates for car insurance than drivers in California – although both states rank among the most expensive for car insurance:

  • The average driver in California pays roughly $2,011 per year for full coverage car insurance
  • The average driver in Texas pays roughly $1,981 per year for full coverage car insurance

Both of these prices are well above average compared to the rest of the United States. Nationwide, the average driver pays roughly $1,350 per year for full coverage car insurance (which includes liability coverage, comprehensive coverage, and collision coverage).

Both California and Texas are among the top 5 most expensive states in America for car insurance, trailing only Michigan, Louisiana, and Florida for the top positions.

Texas Car Insurance Premiums Are Rising More Rapidly

Drivers in Texas might pay slightly less for car insurance than drivers in California today – but this advantage is quickly disappearing.

In fact, in the most recent rankings on some websites, Texas drivers paid slightly more, on average, than California drivers.

According to Insure.com, for example, the average Texas driver pays $2,050 per year for car insurance, while the average California driver pays $1,968 per year.

These numbers make Texas the fourth most expensive state for car insurance, pushing California to the fifth position.

California has always been a more expensive state for overall living costs, which is why many drivers expect to pay more for car insurance. Living costs are slightly cheaper in Texas, although car insurance premiums are rising more rapidly.

Texas vs. California Minimum Car Insurance Requirements

To determine the difference between Texas and California car insurance premiums, it helps to consider the minimum requirements for each state.

Texas has much higher minimum liability insurance requirements than California. In fact, Texas requires 2x to 5x the car insurance limits as California, which increases Texas car insurance costs even with an overall lower cost of living.

California

The California Department of Motor Vehicles (DMV) requires drivers to provide proof of insurance or a surety bond upon request. Minimum insurance limits include:

  • $15,000 of personal injury liability coverage per person, $30,000 per accident
  • $5,000 of property damage liability coverage

Texas

The Texas Department of Insurance (TDI) requires drivers to have the following minimum insurance limits:

  • $30,000 of personal injury liability coverage per person, $60,000 per accident
  • $25,000 of property damage liability coverage per accident

Insurance Premiums Vary Widely Within Texas and California

Drivers in Texas tend to pay slightly cheaper insurance premiums than drivers in California. However, rates vary widely across each state. It’s possible a driver in rural California will pay less than half the premiums of a driver in downtown Dallas.

Why do insurance premiums vary widely across Texas and California? Well, Texas and California are large and diverse states.

California and Texas are the two most populous states in America, with California ranking first (with around 40 million people) and Texas ranking second (with around 29 million people).

California and Texas are also two of the largest states in America geographically, with Texas ranked second overall (behind only Alaska) and California ranking third overall.

Because of the high population, geographic diversity, and large size of California and Texas, insurance premiums vary widely across each state.

A driver in Redding, California has much different insurance needs than a driver in San Diego.

Similarly, a driver in Corpus Christi, Texas has much different insurance needs than a driver in Amarillo.

Because of the geographic diversity of Texas and California, insurance premiums vary widely. Yes, the average driver in Texas pays less for car insurance than the average driver in California – but in reality, premiums vary widely between both states and within both states.

California Weighs Driver History More Heavily than Texas

Are you a safe driver? Do you have zero accidents or citations in the last 10 years? If so, you should pay less for car insurance in California than in Texas.

Insurance companies in California tend to weigh driving history more heavily than insurance companies in Texas. Insurance companies in both states check your driving history, although insurance companies in California consider it more heavily.

If you have one or more accidents on your driving history, then you could pay 70% more for car insurance in California than a driver with a clean record.

If you have one or more accidents on your driving history, then you’ll pay 40% to 60% higher insurance premiums in Texas. That’s still a large bump – but it’s a smaller increase than you would pay in California.

The reason for this difference is related to the information insurers are allowed to use. Insurance companies in California are not allowed to use credit score and other information to calculate risk because of state insurance laws, which means they weigh driver history more heavily than other factors.

Texas Insurance Companies Consider Credit Score

One of the biggest differences between Texas and California insurance laws is the treatment of credit scores.

California is one of three states (along with Hawaii and Massachusetts) that bans insurance companies from using credit scores to calculate premiums.

Statistically, drivers with low credit scores are significantly riskier to insure than drivers with high credit scores. Based on all available accident data, drivers with low credit scores are more likely to make a claim than drivers with high credit scores.

Despite the apparent correlation between credit score and risk, insurance companies in California cannot use credit scores when calculating premiums.

Insurance companies in Texas, however, are free to use credit score and other personal factors to calculate premiums. Insurance companies in Texas use something called a credit-based insurance score to calculate premiums. If you have a high credit score, you’ll pay less for car insurance in Texas than a driver with a low credit score.

Other Factors that Influence Car Insurance in Texas and California

State insurance laws, urban and rural divides, driving history, ZIP codes, natural disasters, and other factors all influence insurance premiums in Texas and California.

Urban and Rural Areas: Drivers in rural areas tend to pay less than drivers in big cities. Drivers in Los Angeles and Fort Worth might pay similar rates for car insurance, while drivers in rural areas of either state will pay less.

Population Density: Population density has a huge effect on car insurance premiums. Areas with denser populations tend to have higher accident rates and crime rates than areas with less population density.

Crime Rate: Crime rates vary widely across Texas and California. If your ZIP code has high rates of vehicle break-ins, vandalism, vehicle theft, and other crime, then you’ll pay higher rates for car insurance.

Natural Disasters: Houston and nearby areas have a higher risk of hurricanes and major flooding. Parts of California have higher risks of earthquakes and forest fires. Based on the risk of natural disasters in your area, insurance companies in Texas and California will adjust rates.

Rates of Uninsured Drivers: Nationwide, approximately 1 in 7 drivers does not have valid car insurance. Both California and Texas have similar rates of uninsured drivers, with an estimated 15% of drivers going without insurance. That’s close to the national average, although certain areas may have higher rates of uninsured drivers than others.

Driver History: Driver history plays a role in both states. A driver with speeding tickets and multiple at-fault accidents will pay more for car insurance than a driver with a clean record.

Final Word – Is Car Insurance Cheaper in Texas or California?

Insurance is all about risk. Based on all of the factors above, insurance companies in California and Texas will analyze risk, then charge premiums based on your perceived likelihood of making a claim.

Generally, drivers in Texas pay slightly less for car insurance than drivers in California – although both states rank among the top five most expensive states in America for car insurance.

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