Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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The lowdown...

  • Drivers must provide insurance companies with their actual address
  • Trying to register and insure a car in another state is a form of fraud called rate evasion
  • States are cracking down on the practice by criminalizing the behavior and pressing charges against people

When it comes to car insurance, rates can vary greatly from one state to another.

If you’re thinking about getting out-of-state insurance to save money, then you’ll need a different plan. Insurance companies and states don’t allow this practice, and it can actually be considered fraud.

Get the coverage you legally need at the best price. Enter your zip code in the free comparison tool above.

The Definition of Rate Evasion

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This practice involves applicants using false information to claim that they live in a different state. In the New England region, people in New York may claim to live in Pennsylvania in order to take advantage of substantial savings.

One of the problems with rate evasion is that the premiums in a given area are based on risk. Although the drivers in New York are still facing the same risks every day, they’re paying lower premiums based on living in Pennsylvania.

This ultimately leads to higher rates both for the people of New York and the residents of Pennsylvania if the policyholders engaging in rate evasion are involved in accidents.

Another challenge is that states are dependent on the fees collected for car registrations. Although these drivers are living in New York and putting a good deal of wear on those roads, the taxes and title fees are going to Pennsylvania.

This is one of the reasons why states are cracking down on the practice.

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Agents Know What to Watch For

Agents are being trained in this practice so that they can learn the warning signs. This includes unanswered phone calls, returned mail from the address giving, and garaging addresses that don’t match the address provided.

North Carolina has had serious problems with fraudulent policies being based out of their state. They’re taking aggressive steps to prevent people from using phony addresses in South Carolina.

Insurance carriers are now required to verify an applicant’s eligibility by:

  • Asking for reliable proof of residency such as property tax receipts or utility bills
  • Look closely at all parties on an application, including co-insured individuals
  • Actively put safeguards in place to prevent this type of fraud
  • Further investigate any policy that they suspect is fraudulent
  • Carefully review all sales, renewals, and claims for rate evasion

North Carolina has some of the lowest auto insurance rates in the nation, but those low rates are only for residents. The state has made rate evasion a Class 3 misdemeanor.

If you deceive an insurer by providing them with false information, you’re engaging in insurance fraud.

Applicants who violate the new section to obtain insurance even though they live out of state may be charged with a Class H felony.

The goal of these changes is to protect state residents and business owners by ensuring that the people receiving those excellent rates are truly eligible for them.

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30 Days to Change Registration

In most states, new residents have 30 days to update their registration and change their insurance plans. You’ll have to visit the local Department of Motor Vehicles to handle the transition.

It’s normal for rates to change when you move from one state to another.

They can go up or down, but you can prepare for this by speaking with your provider ahead of time. If the increase is too high, then you should shop around for better premiums. You also may be able to save by asking about discounts or increasing your deductible.

An Honest Mistake

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There are some cases where people didn’t realize they were engaging in rate evasion. One example is people who have permanent residences in two different states.

Snowbirds, for example, live in a cooler climate during the summer months and head to Florida when the fall temperatures start to drop.

Another example is college students who attend an out-of-state institution. Their parents still have them on their insurance plan, and they may not even think to tell the insurance company that the car is now garaged a few hundred miles away.

The best bet for these policyholders is to speak openly with their insurance company about where the car is at different times. Some companies are able to provide people with policies that take this special lifestyle into account.

Even if you’re required to purchase two policies to keep everything legal, you can always shop around for better rates and ask for multi-line discounts.

The same advice holds true for college students. You may be able to keep them on your plan, or you might have to get another policy for your child.

If you discover that the adjustment will make your premiums uncomfortably high, then shop around for a local policy that will save you money, keep your child legal, and provide the entire family with peace of mind.

An additional concern for people with a part-time residence in another state is the need to still meet state minimum insurance requirements. Florida states that anyone who has a vehicle in the state for more than 90 days will have to register it in that state.

The days don’t even have to be consecutive.

In addition to registering the car, you also need to ensure that it meets the minimum coverage standards set by the state.

If you fail to notify your insurance of the actual garaging location for part of the year, then your company can refuse to pay any claims by calling them fraudulent.

If your car is paid for, then you can go with minimum coverage in the part-time state and save by shopping around.

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Saving on Your Car Insurance

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Whether you’re a resident of the Big Apple or you’re lucky enough to live in a more affordable state, there are other ways to save on your insurance premiums. Companies offer a range of discounts, so see what you might qualify for.

Shopping around will also help you find a company that will lower your rates while still providing you with the necessary coverage. Compare coverage rates today by entering your zip code below.