Car insurance affordability by state: premium as a share of income

No. The most expensive state in dollars is not the hardest to afford once income is counted. Florida had the highest 2023 average premium in the National Association of Insurance Commissioners (NAIC) data ($1,864.63 per insured vehicle), but Louisiana ($1,754.03) takes the top spot when the premium is divided by median household income: about 3.0 percent against Florida's 2.5 percent. Hawaii, meanwhile, falls under 1 percent. Rankings by dollars and rankings by burden overlap but are not the same list, and the difference matters most for the households with the least money to spare.

This article rebuilds the ranking in three ways (dollars, share of median household income, and share of low-end income), explains where each number comes from, shows how the Treasury Department's Federal Insurance Office (FIO) approached the question, and lists the ways the ratio gets misread.

How the ratio is built

Both halves of the fraction come from public sources.

The numerator is the NAIC's average expenditure. In its 2022/2023 Auto Insurance Database Report, the NAIC defines it as the total written premium for liability, collision and comprehensive coverages divided by the liability written car-years, which assumes every insured vehicle carries liability but not necessarily the physical damage coverages. It estimates what consumers in the state spent, on average, per insured vehicle. The 2023 national figure was $1,281.92.

The denominator is median household income from the U.S. Census Bureau's American Community Survey (ACS). The Census Bureau's report on 2023 state incomes put the national median at $77,719 (in 2023 dollars), the District of Columbia's at $108,210 and Mississippi's at $54,203, the lowest of any state.

Divide one by the other and the national average works out to roughly 1.65 percent (1,281.92 divided by 77,719). The Insurance Research Council (IRC) uses the same construction. Its March 2025 brief defines its affordability index as the ratio of average auto insurance expenditures to median household income, with expenditures from the NAIC and incomes from the Census Bureau, and says it is meant for comparing over time and across jurisdictions, not for setting an affordability threshold.

The calculations in this article are our own arithmetic on those two published tables, not figures published by the NAIC, Census Bureau or IRC. They use 2023 data for both halves.

How the ranking changes

Here are the ten jurisdictions where the premium takes the biggest bite of median household income:

At the other end, the lightest burdens are Hawaii (0.93 percent), New Hampshire (1.02), North Dakota (1.06), Vermont (1.10) and Idaho (1.15). The middle state sits near 1.5 percent.

Three things change when you switch from dollars to share:

• High-income places fall. The District of Columbia is fourth in dollars but 24th by share (1.55 percent), because its median household income is the highest in the country. New Jersey drops from fifth to 20th, Maryland from eighth to 26th.
• Lower-income places rise. Mississippi is only 19th in dollars but third by share. West Virginia moves from 32nd to ninth, South Carolina from 15th to seventh, Michigan from 12th to fifth.
• Hawaii becomes the clear low. Its $888.07 average is not the lowest in dollars (North Dakota's $807.77 is), but with a median income of $95,322 it has the lightest burden.

For the dollars-only view and the reasons behind it, see Why dense Northeast and Mid-Atlantic states cost more to insure and What NAIC auto insurance data measures.

What the low-income version adds

A median household income describes the middle of a state. Insurers price risk, not income, so a premium does not shrink because a household earns less. The burden at the bottom of the distribution can look very different from the burden at the middle.

The Census Bureau's ACS 2023 one-year summary tables include a table (B19081) giving the mean household income of each fifth, or quintile, of households in a state. Dividing the same NAIC average expenditure by the lowest quintile's mean income yields a rough measure of what a vehicle's insurance costs households at the bottom. These are the raw ACS data files behind the numbers below. Nationally, the lowest quintile's mean household income was $16,345, so the national average premium equals about 7.8 percent of it.

The District is the telling case. On the median measure it ranks 24th, a comfortable middle. On the low-end measure it jumps to fourth, because the District has very high incomes at the top and low incomes at the bottom. The same pattern lifts New York, whose Gini index of income inequality in the Census report (0.516) ties the District's for the highest among the states and D.C. A state average that looks affordable can hide a large group for whom it is not.

At the bottom of this ranking are Idaho (4.43 percent), New Hampshire (4.47), Hawaii (4.48), North Dakota (4.67) and Utah (4.79).

Read this version with care. The lowest-quintile mean includes many households with very little income in a given year, including students, retirees living on assets and people between jobs, and many households in this group may not have an insured vehicle at all. The ratio therefore describes what the premium would mean to a bottom-fifth household that does buy a policy, not what typical bottom-fifth households spend.

How the Federal Insurance Office measured affordability

Treasury's Federal Insurance Office took a different route in two reports, and the contrast with the state-level ratio is worth understanding.

In its January 2017 Study on the Affordability of Personal Automobile Insurance, FIO defined an Affordability Index as the average annual written liability premium in the voluntary market divided by median household income, calculated for ZIP Codes where "Affected Persons" are at least half the population. Those are majority-minority ZIP Codes and low- or moderate-income ZIP Codes (low-income meaning median family income below 50 percent of the surrounding metropolitan area's, moderate-income 50 to under 80 percent). FIO presumed liability insurance unaffordable above a 2 percent index, because the study cites Bureau of Labor Statistics survey data showing U.S. consumers spent about 1.8 percent of after-tax income on vehicle insurance in 2013 and 2015. It found 845 of the 9,172 Affected Person ZIP Codes above the line, home to more than 18.6 million people.

Three design choices differ from the state ratio above:

1. Smaller geography. FIO worked at the ZIP Code level, not the state level.
2. A narrower product. The index looks at liability coverage (plus personal injury protection where mandatory) at the state's financial responsibility minimums, not the blend of liability, collision and comprehensive that the NAIC averages.
3. A warning against the very comparison this article makes. FIO wrote that the index "allows for comparison of ZIP Codes within the same state, but should not be considered for interstate analysis," because states differ so much, and that it is not appropriate for measuring the affordability of a premium paid by any one person.

FIO's January 2025 Report on Personal Auto Insurance Markets and Technological Change updated the analysis with 2022 data. It kept the 2 percent line but added 1.5 and 3 percent ratios, explaining that "no single ratio can define affordability" for all consumers. It reported that about 16.5 million residents lived in Affected Person ZIP Codes with a ratio at or above 2 percent, down from 18.6 million in 2017, and that about 94 percent of the U.S. population lived in ZIP Codes where the ratio was under 2 percent.

The takeaway is that the Treasury treated affordability as a range of thresholds, measured locally. A state-level ratio is a screening tool, a way to see where to look, not a verdict.

Affordability and uninsured drivers

Affordability is not only an economics question; it feeds back into how many people drive uninsured. The FIO 2017 study noted that lower-income drivers are more likely to be uninsured, which could indicate a link with affordability, and that accidents involving uninsured drivers can contribute to higher premium costs for those who are insured.

The Insurance Research Council's estimates for 2023, published through the Insurance Information Institute, show how the picture varies. Mississippi has the highest uninsured share in the country, at 28.2 percent, and it ranks third on the income-share ratio. Michigan (22.3 percent uninsured) ranks fifth. At the other end, Utah (6.2), Idaho (6.4) and Maine (5.7) have some of the lowest uninsured shares and low burdens. Hawaii is at 9.6 percent.

But the link is loose, and the exceptions are instructive:

Louisiana and New York have very heavy burdens and below-average uninsured rates, which suggests that enforcement, verification systems and legal rules matter alongside price. The direction of cause also runs both ways. High premiums push some drivers to go without coverage, and more uninsured drivers raise the cost of uninsured motorist coverage for everyone who stays insured. Where a state is on that loop depends on policy choices such as verification systems and low-cost programs; see uninsured drivers by state and state low-cost auto insurance programs.

A worked example: why the ratio changes with the household

The numbers below are hypothetical, chosen to show the arithmetic. Say a household in a state with a $1,400 average expenditure earns $70,000 a year and insures two cars.

1. Per-vehicle ratio: $1,400 divided by $70,000 is 2.0 percent. That is the figure the state-level ratio would report.
2. Household ratio: two vehicles at $1,400 each cost $2,800, which is 4.0 percent of $70,000.
3. A household earning $30,000 with one car: $1,400 divided by $30,000 is 4.7 percent.
4. The same household at the lowest-quintile level of $16,000: $1,400 divided by $16,000 is 8.8 percent.

Nothing about the state's average changed across those four lines. Only the household did. The NAIC figure is per insured vehicle and the Census figure is per household, so a state-level ratio understates what a multi-car household pays and says nothing at all about a particular household's income.

Using the ratio without misusing it

1. Do not read it as a verdict on any one driver. Your premium comes from your own rating factors, not the state average.
2. Remember the numerator is an average of everything. It blends minimum-limit policies with high-limit ones and includes optional collision and comprehensive coverage. A state where more drivers buy only the required minimums can look cheaper than it feels to drivers who want more protection. State rules on required coverage differ; the state car insurance requirements lookup shows what yours demands.
3. Respect the margin of error. The ACS is a sample. The Census report's 2023 median for Louisiana was $58,229 with a margin of error of $1,143; for Mississippi, $54,203 with a margin of $1,260. Ranks that differ by a few hundredths of a percentage point are statistical ties. Look at tiers, not positions.
4. Match the years. The premium data are for 2023 and the incomes are for 2023 in inflation-adjusted dollars. Premiums have moved since, and income and premium may have moved at different speeds in your state.
5. Do not compare across measures. An NAIC-based ratio of 2.1 percent and an FIO ZIP Code ratio of 2.1 percent measure different things.
6. Check whether you are looking at a state or a jurisdiction. The District of Columbia is not a state, is entirely urban and has a very unusual income distribution.

For more on reading studies like this one, see how to read car insurance rate studies and average-cost claims.

If the share is high where you live

A high ratio describes your neighbors as well as you. A few steps can reduce your own, in order of how much control you have:

1. Compare quotes from several insurers at your actual address. Insurers weigh the same factors differently, and the spread between quotes is often larger than the difference between states.
2. Ask whether you qualify for a state low-cost or assigned program. Some states run them; state low-cost auto insurance programs covers how they work.
3. Check coverage you do not need. Dropping collision on an old car may help, but only if you could replace the car without it. Liability limits above the state minimum are a separate decision about how much of your assets you want protected.
4. Ask about discounts you are not getting.
5. Do not let the policy lapse to save money. A lapse can raise the next quote and can leave you without protection against a lawsuit.

Common questions

Is the most expensive state in dollars also the hardest to afford?

Not necessarily. Florida is first in dollars but second in share of median income, behind Louisiana. The District of Columbia and New Jersey are in the dollar top five but fall to the middle of the pack by share, because their median incomes are the highest.

Which measure is best?

None is complete. Dollars show the cost of the product, the median ratio shows the burden on a typical household and the lowest-quintile ratio shows the burden on those with the least. FIO's own conclusion was that no single ratio defines affordability, so reading all three together is more informative than choosing one.

Does a lower ratio mean insurance is cheap for me?

No. A state with a low ratio can still have high-priced territories. Pricing depends on where you live inside the state, your record, your car and your coverage. See Why dense Northeast and Mid-Atlantic states cost more to insure for an example of how a statewide average hides local differences.

Why does the Treasury discourage state-to-state comparison?

Because states differ in coverage requirements, tort rules and rate regulation. A state with mandatory personal injury protection will show a higher average than one without it, for reasons that have little to do with how fairly priced the insurance is. FIO's 2017 study said its index was best used within a state.

Key takeaways

• In 2023 NAIC and Census data, Louisiana is the least affordable state by share of median income (about 3.0 percent), ahead of Florida (2.5 percent), even though Florida's premiums are higher in dollars.
• High-income jurisdictions such as the District of Columbia, New Jersey and Maryland rank much better on the income-share measure than on dollars, while Mississippi, West Virginia, South Carolina and Michigan rank much worse.
• Using the lowest-income fifth of households raises the burden everywhere (about 7.8 percent nationally) and moves unequal places like the District and New York up the list.
• The Federal Insurance Office measures liability premiums against ZIP Code incomes, uses 1.5, 2 and 3 percent thresholds, and warns against state-to-state comparison.
• The ratio is a screening tool: it mixes per-vehicle premiums with per-household incomes, carries sampling error, and cannot tell you what you will pay.