Do the poor pay more on car insurance?

A curious Dodo reader writes:

“Dear Dodo,

After spending most all of my money on my car (and a relatively low insurance rate, thanks again guys!) I’m not able to afford the same living accommodations as some of my friends. I live in a fairly large apartment building with above ground parking in the center of a large city. (I’m not saying where from!) OK, moving on!

I am generally a pretty cautious driver. I have a perfect driving record. I have been free of accidents for the past 10 or so years, and these qualities are synonymous with the majority of my friends (except for old ‘Brewski Billy’ … joking!).

My question is this: Why do I pay so much more for insurance on my car while my friends that have more money and live in great, big, expensive houses seem to ‘catch a break’?

Sincerely,

Jimmy H. from New York, U.S.A.”

Dear Jimmy,

Great question! I used to wonder the same thing myself after having moved out of my parents quiet, protected neighborhood off into the big, dangerous city.

Note my choice of words above, protected vs. dangerous. Car insurance companies have for a long time made a note of that difference too.

If you could please forgive my assumptions, as I’m going to give you a hopefully likely situation from the insurance company’s point of view based on the general information you have provided in your question.

You park in above ground parking.

Your friend parks in his (possibly alarm protected) personal garage.

Insurances companies only see that your car:

• Is in a high traffic area.
• Has a much greater chance of getting hit by another car. (Since your friend probably only parks beside his partner or roommate’s car if he lives in his own house.)
• Could more easily be accidentally scratched by a sweet old lady or perhaps ‘keyed’ by an unscrupulous passer by. (Again, higher foot traffic.)
• Is not protected by some external security force. (If he or she does indeed have an alarm installed inside their garage.)

When you start to look at it that way, you begin to get the picture.

TRAFFIC = MONEY

As in real estate, the answer to your question is location, location, location! Basically the more people and cars you have around you, the higher your car insurance quote is going to be. Traffic equals money.

Hopefully that answered your question. Feel free to write us another one or leave us a comment in the space provided below!