Why Is Auto Insurance so Expensive In Texas?

Last Updated on November 26, 2021

How does Texas compare with other states when it comes to auto insurance rates? It certainly seems like it’s expensive to get insurance, but how expensive is it?

Many people think that Texas is one of the most expensive places in the country to get auto insurance. In fact, Texas isn’t even in the top ten nationwide for the highest averages for car insurance.

Why does it seem so high? Why are your auto insurance rates in Texas so high? Continue reading below to find out.

Why is Auto Insurance So Expensive in Texas?

Why Is My Texas Auto Insurance So Expensive?

Insurance companies set their rates based on ZIP codes.

Texas is the 2nd most populous state in the United States. Furthermore, the vast majority of the Texas population lives within the triangle made up of the Dallas-Fort Worth metropolitan area, Houston, and the San Antonio-Austin metropolitan area.

With it being such a big state and with most of the population living within just a few areas, auto insurance rates fluctuate wildly across the state.

Insurance companies set their rates based on factors within a certain ZIP code. It’s not state-wide, it’s all based on ZIP codes.

This means that the people living in West Texas are paying much less in auto insurance premiums than the people living in Houston.

In fact, Houston is one of the more expensive cities for auto insurance in the country. It’s not the most expensive, but it’s on the list.

Reasons Why Insurance Is High In Texas Cities

Rural Texas doesn’t have as high of rates, but the big cities of Texas, especially Houston, do have higher rates. There are a few reasons for this.

1. A high number of auto accidents

With such a large amount of people living in a few areas, traffic is becoming very congested.

It’s simple math: with a higher number of cars in a small area, there’s a greater chance for an accident. This is exactly what’s happening in Texas’ cities and the reason for an increased number of accidents on Texas roadways.

2. More expensive vehicles

Texans are purchasing more expensive cars, with the latest and greatest technological advances. Newer cars are equipped with an increasing number of sensors, they have Wi-Fi and Bluetooth technology, and in many ways resembled driving computers.

Some of the latest models are also starting to feature self-driving capabilities, which pushes the price even higher. This makes repairing or replacing these cars more expensive for insurance companies.

3. High-speed limits and reckless driving

This can also help explain the overall increase in auto accidents. Texas’ average speed limits are one of the highest in the country. When you combine this with the fact that many Texans drive very fast, and many of them have big trucks, it becomes a recipe for an accident.

Big, expensive trucks driving very fast in a congested area will result in more accidents.

4. Increasing Number of DUIs

Unfortunately, Texas has the highest number of DUIs that result in fatalities in the country. In 2016, there were 1,438 fatalities in Texas. There were over 10,000 injuries from DUI accidents in 2016.

This is a big reason why car insurance rates seem to be higher in Texas. With so many DUI accidents and fatalities, insurance companies are paying out a lot of money in claims.

Just as importantly, they are also projecting to pay out a lot of claims money in the coming years, knowing that Texas as a big problem with DUIs.

The good news, for drivers with DUIs on their record, is that the Texas Automobile Insurance Plan (TAIPA), allows high-risk drivers to maintain legal coverage without breaking the bank.

Insurance Companies Are Trying to Break Even

With the high number of accidents and more expensive claims, auto insurance companies in Texas need to set higher premiums to cope with these numbers. It’s common for insurance companies to lose money in any given year on auto insurance.

When this is the case, they will likely raise rates in the following year to try to recoup some of that money as well as plan for further losses in the upcoming year.

They look at the finances of each ZIP code: how many accidents there were, how much premium was received, and how much was paid out in claims.

ZIP codes that perform badly (had a lot of accidents and paid out a lot of money in claims) will get hit with a larger rate increase the following year. However, this doesn’t mean that safe ZIP codes are completely immune from rate increases.

While companies look at ZIP codes, they also look at the overall state’s performance. If overall there is a greater amount of money paid out in claims, or if they project that to happen in the upcoming year, the whole state will likely have a rate increase.

In other words, the entire state might have a 7% increase, and then certain ZIP codes in metropolitan areas could see a 15% increase.

This has been happening in Texas a lot lately and is a big reason why Texas drivers in the bigger cities are seeing such high auto premiums.

Cheap Auto Insurance Options for Texans

Drivers in Texas looking to save on their auto insurance rates will get the most bang-for-their-buck by frequently comparing auto insurance rates and signing on with the cheapest option available. As of 2020, the following insurance companies offer the cheapest average rates to Texas drivers for minimum coverage:

RankCompanyAverage Yearly Rates
1Fred Loya$550
2Texas Farm Bureau$620
4State Farm$800
Andrew Flueckiger
Andrew Flueckiger Andrew Flueckiger is an experienced insurance agent with experience in sales, management, leadership, and marketing. A graduate of Indiana University, Andrew is a licensed insurance agent specializing in personal and commercial insurance. Andrew not only holds a wealth of insurance industry knowledge and expertise, in 2016, he also obtained the Certified Insurance Counselor designation.
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