Managing Rising Auto Insurance Costs

Auto insurance rates are escalating rapidly, with projections indicating significant double-digit growth this year and potentially in the future. Once rate hikes by insurers receive approval from your state’s Department of Insurance, these increasing insurance expenses are typically passed on to consumers. Read on and we’ll explain the reasons why rates increase and what consumers can do to limit their exposure.


car accident and auto insurance


3 Reasons Why Auto Insurance Rates Are On the Rise

Auto insurers may have varying reasons for seeking rate increases, but typically those reasons are the same regardless of the carrier. The current rates increases may be attributed to the following:

1. Increasing Costs for Repairing and Replacing Vehicles

Due to labor shortages and supply chain disruptions in the auto industry, the cost of vehicle repairs and maintenance has risen significantly. The demand for transportation technicians has outpaced supply, leading to higher labor costs. Supply chain issues have also led to spikes in prices for auto parts and vehicles.

2. Increased Accident Rates and Claim Costs

There has been an increase in the number and severity of car accidents in recent years. This has led to more insurance claims and more expensive claims, contributing to the rise in insurance rates.

3. Severe Storm Damage

The frequency of costly weather events has grown, leading to more and more expensive storm-related insurance claims. This increase in storm damage and the consequent claims contribute to higher insurance rates.

10 Ways to Control Your Auto Insurance Costs

With costs rising, consumers should carefully consider how they can manage their auto insurance costs. The following are 10 examples that can help.

1. Shop Around for Better Rates

Obtain at least three quotes from different insurers, considering their financial stability and customer satisfaction. Use resources like AM Best and Standard & Poor’s to evaluate insurers’ financial health. Remember, the cheapest option isn’t always the best; consider customer service and company reputation.

2. Consider Vehicle Insurance Costs Before Purchase

The insurance premiums for different cars can vary based on factors like repair costs, safety record, and theft likelihood. Use resources like the Insurance Institute for Highway Safety for guidance on which cars are cheaper to insure.

3. Opt for Higher Deductibles

Increasing your deductible from, say, $200 to $500 or even $1000 can significantly reduce your premium. Ensure you have enough funds set aside to cover the higher deductible in case of a claim.

4. Reduce Coverage on Older Cars

For older vehicles, dropping collision and comprehensive coverage might be cost-effective, especially if the car’s value is less than ten times the premium.

5. Bundle Insurance Policies

Buying multiple insurance types (like auto and homeowners) from the same company can lead to discounts. However, it’s still wise to compare prices as separate policies from different insurers might be cheaper.

6. Maintain a Good Credit Record

A solid credit history can result in lower insurance costs, as insurers often correlate good credit with fewer claims.

7. Low Mileage Discounts

If you drive less than the average number of miles per year, you might qualify for a discount, especially if you carpool to work.

8. Group Insurance Options

Check if your employer or any association you belong to offers group insurance plans, which can sometimes offer better rates.

9. Explore Various Discounts

Insurers offer discounts for a multitude of reasons – no accidents or moving violations for a set period, defensive driving courses, good student records, etc. Always inquire about available discounts when comparison shopping.

10. Maintain a Good Driving Record

Above all, maintaining a good driving record is crucial. Avoiding accidents and traffic violations can significantly lower your insurance rates.

Auto Insurance and Your Score

While you may not have direct control over insurance rate hikes, you do have the option to provide input to your state’s insurance department. This is particularly crucial if you’re facing an issue that requires the state’s intervention. Additionally, it’s beneficial to obtain your insurance score, as it can give you a clearer understanding of how any rate increases specifically affect you. You can obtain that score from your insurer or from Lexis Nexis directly.


References

Carver, A. (2023, December 12). Auto Technician Shortage. Expect Higher Car Repair Costs. MarketWatch

Kraemer, G. (2023, August 2). Insurance rates may rise after severe storms: What you need to know. KKTV.com

Nine ways to lower your auto insurance costs. Insurance Information Institute.

Dunn, A. (2022, March 15). Insurance Scores: What They Are and How to Check. Credible.


See AlsoWhy is Car Insurance Expensive for Young or First-Time Buyers?

Matt Keegan
Author: Matthew Keegan
Matt Keegan is a journalist, media professional, and owner of this website. He has an extensive writing background and has covered the automotive sector continuously since 2004. When not driving and evaluating new vehicles, Matt enjoys spending his time outdoors.

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