Is It Illegal to Have Auto Insurance in a Different State Than the One in Which You Live?

The cost of auto insurance varies considerably from state to state. Although exact comparisons are difficult to make due to yearly fluctuations in the cost and availability of auto insurance policies, it's possible to save hundreds of dollars on your car insurance simply by registering your vehicle in a low-cost state. The variation in auto insurance pricing is the result of many different legal and economic forces. Some variation may even be the result of the "pricing noise" that randomly affects the costs of other goods and services. Unfortunately, these discrepancies can have serious effects on cash-strapped drivers. If you maintain residences in two states and want to save money on your car insurance costs, you'd be forgiven for registering your vehicle in the "cheaper" state.

Unfortunately, this may not be legal. In certain circumstances, it may constitute insurance fraud. Although the pertinent laws vary from jurisdiction to jurisdiction, you should assume that you have 30 days to change your registration after establishing a primary residence in a new state. In order to do this, you'll need to visit your local motor vehicle bureau and provide proof of your new address. Most bureaus will accept certified mail, utility bills, rent or mortgage receipts, or other types of information that can be verified with your credit report.

While you're changing your registration, you may also need to obtain a new driver's license. Although state identification protocols are typically enforced separately from vehicle-registration laws, you might find it easier to make both changes at the same time. During a traffic stop, you might be subjected to uncomfortable scrutiny after providing the officer with an out-of-state driver's license.

Once you change your vehicle's registration, you're obligated to inform your insurance company that you've moved. This will trigger a timely reevaluation of your rates and may result in substantial savings on your end. Even if the average cost of insurance is more expensive in your new home state, your provider may give you a "loyalty discount" in order to retain your business. As such, it's unlikely that you'll have to stomach a major premium increase.

If you fail to inform your insurance company of your move, you could face charges of insurance fraud. If you forget to register your vehicle before the 30-day grace period expires, you'll eventually be charged with "improperly registering a vehicle." Although some drivers are able to avoid facing charges on these matters for years, it's unlikely that you'll be able to evade detection forever.

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