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

If you've lived and driven in multiple states, you know that the cost of car insurance varies wildly from place to place. The complex actuarial algorithms that determine the average cost of insurance premiums in various locales may weigh such factors as local weather, rates of property crime and multiple-car accidents, and state-mandated minimum coverages.

You may be tempted to beat your insurer at its own game by registering and insuring your car in a "cheaper" state. While you can't simply make up an address in another state and claim to live there, you may be able to convince your insurer that you still live at a legitimate previous address. To reduce the logistical headaches associated with keeping close tabs on their policyholders' movements, most insurance companies rely solely on self-reported information to determine their customers' current locations.

Unless you're involved in an accident in your new location, it's unlikely that your insurer will learn of your move. However, it's to your benefit to provide your insurance company with your new address within a few months of arriving there. There are two reasons for this.

First, the laws in your new home state almost certainly require new arrivals to register their vehicles with the local DMV within a specified time frame. If you fail to do so within six months of moving, you'll almost certainly run afoul of the law and risk serious fines. It's not uncommon for frequent movers to flout these laws and maintain vehicle registrations in their former places of residence. However, the costs of being found out far surpass those of re-registration.

Secondly, auto insurance contracts prohibit policyholders from misrepresenting their places of primary residence. If you move, your insurer expects you to notify them of your new location as soon as you re-register your vehicle there. Failure to do so may put you in a tight legal and financial spot: It technically constitutes insurance fraud and gives your provider a clear reason to deny any claim that you make on an accident that occurs near your new home.

While insurance-fraud prosecutions for withholding this type of information are rare, your insurer may take matters into their own hands after learning of your "deception" and cancel your policy outright. You'll lose coverage immediately along with any premiums already paid toward your policy. Worse, you may have trouble finding an affordable new policy.

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