Jessica Sautter is a Content Writer for with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Sep 26, 2020

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Key takeaways...

  • Rate evasion is the practice of lying about location in order to obtain lower rates, and it’s illegal
  • States lose revenue in registrations and license plate fees as a result
  • Insurers now have access to special technology to help them catch this crime before it incurs losses

If you’re trying to save money on your auto insurance, you may have discovered that your neighbors in another state have lower premiums.

It may be tempting to use a friend’s address in order to get those attractive rates, but this practice is actually illegal.

You can still save by shopping around, but you should also understand why rate evasion is such a serious problem for consumers across the country. Comparison shop today and see how much you could save!

Location Determines Premiums


Where you live does play a vital role in premium levels. Some states simply have a higher cost of insurance than others. Even within the same state, different cities and neighborhoods can see fluctuations in premium levels.

You’ll also find that the cost of insurance is generally higher in urban centers where the risk of vandalism, theft, and accidents is slightly higher. There are several factors that drive rates in different states, including:

  • Fraud levels
  • Frequency and overall cost of litigation
  • Medical expenses
  • Car repair costs

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Car Insurance by State

The variance in insurance premiums is clearly seen when comparing average rates between different states. It may surprise you to learn that Louisiana has the highest rates in the nation, and Wisconsin has the lowest rates.

In fact, your zip code can account for as much as 82 percent of the price difference you face between different areas.

In some examples, the differences in rates can be dramatic just by crossing a river or going into another city.

This is why insurance companies insist on knowing where you actually live, and states are starting to back up that request with laws mandating that people provide accurate information regarding their actual locations.

However, you can still save by looking at different companies. Comparison tools make it easy to check different premium levels and find one that works for you.

Rate Evasion is a Crime


The practice of lying about your address in order to obtain cheaper insurance through another state is called rate evasion, and it is illegal in certain states.

New York is launching an initiative designed to stop this practice in order to keep costs down for other consumers. Research conducted by the Independent Democratic Conference revealed that:

  • Millions of dollars in registration fees and related revenues are being paid to states other than New York
  • The insurance company has seen a large spike in the number of people engaging in this practice
  • In 2007, New York State had more than $73 million in unpaid parking tickets issued to out-of-state vehicles, and this is a major indication that rate evasion is on the rise

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The lost revenue puts a strain on the entire community because the city uses those funds for maintenance and other services. The same number of accidents will occur in the state, but insurance companies will have a smaller pool of people to help carry the burden.

This leads to even higher coverage rates in areas that were already more expensive.

At the same time, when drivers with out-of-state insurance information do get into accidents, it changes the statistics for that state.

For example, a New York driver with Pennsylvania registration and insurance is more likely to get into an accident when driving in the heavy city traffic in New York.

The subsequent claims would appear to be from accidents occurring to a Pennsylvania resident, and that will eventually lead to higher rates for drivers in Pennsylvania.

New York is attempting to counter this activity by bringing criminal charges against the people who engage in this practice.

In addition to charging the insured individuals, they will also press charges against the parties who provide out-of-state individuals with illegal registration cards and addresses for insurance.

Insurance Companies Demand Honesty


Insurance companies base rates on the information they’re provided with, so they expect applicants to be honest and accurate with details. However, people sometimes give the companies false information in the hopes of getting lower rates.

It’s vital that you’re upfront with your carrier about:

  • How far you drive and how the car is used
  • Who is driving the vehicle
  • Where the car is parked

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Understanding Fraud

Misrepresenting facts to your insurance company is fraud, and it does have consequences. It doesn’t matter if the goal is to obtain artificially low rates or to collect money that you’re not entitled to. Statements are fraudulent when they are:

  • Knowingly misleading or completely false
  • Made in connection with claims or payments that are due
  • Material in nature

The two types of fraud are soft and hard. Soft fraud relates to exaggerations on existing claims and is generally a misdemeanor. Hard fraud is when a person intentionally makes up a claim or fabricates the loss, and it is a felony that carries harsh penalties.

An App for Insurance Companies


It’s believed that rate evasion leads to billions of dollars in losses annually, and insurance companies are trying to put an end to the practice. A new service is now available to help insurance companies spot rate evasion before a claim is filed.

This service uses special technology to recognize license plates in a certain area. The data collected helps insurers determine if a car registered to a certain address is actually being operated in that area and parked on that property.

It can be particularly effective for insurers in New York and other high-cost states where rate evasion levels are high.

The Consequences of Rate Evasion

Depending on the state you live in, consequences can range from the insurance company refusing to cover a claim to prison time. Insurance companies may look at details like where your utility bills go to in order to determine if you’re engaging in this practice.

In some cases, neighbors may turn the information over to authorities because they don’t want to ultimately pay the price for someone else’s false information.

Although using a different address to get out-of-state insurance is illegal, there are still ways for you to legally save on your premiums.

Take the time to shop around for better rates, and ask providers about discounts you may qualify for. If you have a clean record, then you’ll be able to take advantage of lower premiums even in states like New York.

Enter your zip code below and begin comparison shopping for car insurance to see how much you could save!