Why this car costs $4,400 a year to insure

Reader Eric's e-mail landed in our mailboxes with the subject line "Criminally high insurance rates."

I just finished reading two articles on your website. One article featured the least expensive cars to insure. The other article explored the most expensive cars to insure. The most expensive car being a 2014 $115,000 Nissan GT-R that cost $3,169 to insure for annual coverage.

The question I have is why did I just receive an automobile insurance quote of $365 per month, $2,200 for six months, and, thus, $4,400 for one year's full coverage 2009 Chevy Aveo subcompact that cost only $9,900? I live in Detroit. I'm well aware of the practice of paying more due to crime, etc. But these grossly excessive rates seem criminally high. 

I agree that car insurance rates in certain cities, Detroit being one, are insanely high.  And while I wouldn't want to spend this much on car insurance, I can explain why it is that some folks, like Eric, are receiving car insurance rate quotes higher than what it would costs others to insure an “affordable supercar” like the $115,000 Nissan GT-R.

Where you live matters - a lot

Car insurance rates are based on many factors, among them the make and model of your car.  But these aren't the only ones. 

Minimum car insurance requirements vary significantly by state.  In general, the more insurance coverages you're required to carry, the higher the cost will be because the auto insurance provider is taking on the risk that it may have to pay out for more types of situations.

Michigan, where our reader Eric is located, tops our list of most expensive states for car insurance.  This is due to a number of reasons, but the biggest being the guarantee of lifetime personal injury protection benefits if someone is severely injured in an auto accident.  Also, drivers must carry $1,000,000 worth of property protection insurance (PPI) to cover inanimate objects damaged by the insured vehicle.

Your car insurance company also looks beyond the state where you live and considers the specific area you reside in.