Registering and insuring your vehicle using your sister's
address in the next state or your parents' house in a neighboring
county might seem a clever way to save money on your car insurance
In some cases, doing so might save you hundreds or even
thousands of dollars a year. In Bullhead City, Ariz., for example,
a 40-year-old man driving a 2012 Honda Accord would pay about $729
a year. But across the Colorado River in Laughlin, Nev., the same
driver would pay about $1,580.
Compare what drivers pay in these neighboring ZIP codes:
- Attleboro, Mass.: $977 Pawtucket, R.I.: $1,860
- Fort Smith, Ark.: $1,075 Roland, Okla.: $2,116
- Hazel Park, Mich.: $2,485 Detroit: $4,314
You can check out the differences in your city with
Nosy Neighbor tool
The temptation is clear enough. But if you're caught with your
car registered at the wrong location, you could see your auto
insurance claim invalidated or a bill for unpaid premiums in your
And if you live in New Jersey, you might soon face criminal
So what's the harm in cheating?
While fudging on your address might seem harmless enough, it's a
practice known as rate evasion, and it's considered a form of
insurance fraud. A 2010 report by Quality Planning Corp., an
industry analyst, put the cost to insurers at more than $1 billion
"It's one of those issues that cause consternation," says Howard
Goldblatt, director of government affairs with the
Coalition Against Insurance Fraud
in Washington, D.C. The nonprofit's membership is made up dozens of
insurance companies, consumer groups and government
With rate evasion, people claim to live in another state or that
their car is garaged there, in order to pay lower insurance rates.
They might also say they live in another, less costly county in the
If you say you live in Pennsylvania and you actually live in New
Jersey, "you're posing a risk here but you're not paying for that
risk," says Chuck Leitgeb, vice president of the Insurance Council
of New Jersey. The insurance advocacy and research group comprises
20 companies that together underwrite two-thirds of the state's
Residents of your home state whose vehicles are registered in
the right location end up covering your share of the costs by
paying higher auto insurance rates, Leitgeb says.
And drivers of the state you falsely claim as your own face
higher premiums if you have an accident -- because your wreck makes
their statistics look worse than they actually are.
Rate evasion can have unexpected consequences. The Michigan news
site MLive.com found that a large number of Detroit residents had
registered their vehicles in other, less expensive parts of the
state, depressing the number of registered voters in the city.
Where the cheaters live -- and don't live
Rate evasion is particularly common in states such as New
Jersey, New York and Florida - all states with sky-high auto
insurance rates in some of their metro areas. Residents will use an
address or a P.O. box in another location to register their
In certain areas of New Jersey, especially northern, urban
areas, and the southern part of the state bordering Pennsylvania,
it's not uncommon to see plenty of cars with out-of-state license
plates regularly parked in people's driveways and on residential
streets, Leitgeb says.
It's a similar situation in New York, where cars from North
Carolina and Pennsylvania can be found parked in the middle of the
week on Brooklyn streets, Goldblatt says. Prosecutors report dozens
of vehicles registered at some Pennsylvania addresses.
Many people get away with evading rates. Others don't.
Their fraud may be discovered once a claim is filed. If
insurance companies suspect you're a rate evader, they can pay a
company such as Lexis-Nexis to do a public records search. If your
car is insured in North Carolina but your phone bills go to New
York, you may have a problem.
Or their neighbors may turn them in. "It drives people crazy,"
New York state Sen. Diane Savino told the New York Post.
"Constituents are calling my office to report motorists who have
out-of-state license plates."
New York legislators have even proposed a reward for doing so.
Some states already have online systems to report cheaters, like
run by the California Highway Patrol.
The worst that can happen? Prison.
Some states are moving to crack down on the practice of rate
evasion. North Carolina and Idaho, which have some of the lowest
auto insurance rates, have made it tougher to register a vehicle
In Pennsylvania, the Attorney General's Office has stepped up
rate evasion prosecution. Last year, for example, a New Jersey man
and 11 co-conspirators were charged with illegally providing
Pennsylvania vehicle registrations and insurance to people who
lived in other states.
Now New Jersey has the practice in its sights. Under current
state law, New Jersey's Office of the Insurance Fraud Prosecutor
can't prosecute such cases because they're not considered a form of
But that soon could change. A bill working its way through the
state's Legislature would classify rate evasion as insurance fraud,
with varying levels of criminal penalties if someone is convicted,
including up to 18 months in jail.