The cost of owning a car varies from state by state, with auto insurance remaining one of the biggest variables.
That's partly because each state has its own regulations on minimum coverage, which can result in a difference of thousands of dollars. The most expensive state for buying vehicle insurance is Michigan, where the average annual cost for minimum coverage is a $2,446, according to CarInsurance.com, a quote-comparison site. The title for cheapest state goes to North Carolina, where minimum coverage will set drivers back by only $385.
Rates are based on a number of issues, ranging from the minimum requirements of each state as well as the number of accidents in each region and the percentage of uninsured drivers. Generally, consumers can reduce their premium to the lowest possible by signing up for liability insurance at their state's minimum limit, but that strategy can be risky.
"Buying just the minimum amount of insurance required to drive legally typically doesn't pay off," said Michelle Megna, managing editor of CarInsurance.com. "Even a minor accident can cost much more than what your insurer will pay out to cover damages."
In seven states at least one out of five drivers is uninsured, Megna said. They are Oklahoma (26 percent); Florida (24 percent); Mississippi (23 percent); New Mexico (22 percent); Michigan (21 percent); Tennessee (20 percent); and Alabama (20 percent).
It might be tempting to drop car insurance given the overall costs of owning a car, but experts say the first step is to shop around and consider ways to lower your insurance costs.
The overall costs of owning a car -- including insurance, sales tax, gasoline and costs such as maintenance -- can vary widely by state, according to a new study from GOBankingRates.com, but Michigan again emerged as the costliest. Drivers there will pay more than $15,300 for three years of car ownership, while drivers in the least expensive state -- New Hampshire -- will pay just over $8,000.
Minimum liability coverages are usually written like 30/60/25, which means an owner must be covered for up to $30,000 of medical expenses per person, up to $60,000 in medical expenses per accident and up to $25,000 for property damage.
Still, drivers should be aware that they're taking on more risk if they opt to pare coverage. For instance, if a car lacking comprehensive coverage is damaged when a tree falls on it, the owner is on the hook for covering those repairs.
Before dropping coverage, GOBankingRates' lead reporter Elyssa Kirkham said, consumers should ask whether they have "emergency savings for those incidents where you backed into a concrete pole, or when you need to have a car repaired." She added, "Could you pay for that out of pocket? If you can, then your need for insurance coverage will be less."
Signing on for minimum coverage usually makes sense only if a consumer fits one of several profiles, CarInsurance.com found.
If a car is old and not worth much. In this case, it might make sense to skip collision and comprehensive coverage. The first pays if a car needs to be repaired after an accident, while the latter pays to replace a car if it's stolen or if it needs repairs after suffering damage outside of a collision with another car, such as vandalism or if a tree falls on the vehicle.
If the owner doesn't drive frequently. Less time on the road means less chance of getting into an accident.
The owner doesn't have assets that could be at risk. If you're at fault in an accident and have low insurance coverage, you could be sued to recover damages that your insurer doesn't cover. That means your home or other assets could be at risk, although CarInsurance.com notes that 401(k)s and pensions are protected. IRAs, however, might not be sheltered in some states.