Why are car insurance costs rising?
The cost of cars has risen a lot over the last couple of years, but now the insurance rates are also rising. What you pay for your insurance depends on your location, the type of car, your age and driving record.
However, there are a few factors that determine everyone’s price increases. The main factor is our economic inflation. Because of the high inflation, all costs have risen over the last couple of years.
This includes higher costs for labor and medical care after accidents, but also more expensive car parts, which were hard to find due to supply chain issues and the costs of new and used cars.
These higher costs have resulted in financial losses for car insurance companies, so they have been looking to regain that or at least break-even.
Besides the economic inflation, social inflation is also a cause of the rise in insurance rates, which means that people are more likely to file or litigate claims.
Moreover, risky driving behavior and increases in traffic death and speeding- and alcohol-related crashes, also contribute to higher car insurance costs.
How much could car insurance costs rise?
What you pay for your car insurance varies from person to person. However, car insurance rates are up nearly 15% in some states over the past year and the increases are not over yet.
It is expected that car insurance costs will rise by (on average) 8,4% this year. This is more than the current inflation of 4.9% and will be the largest increase in car insurance costs in six years, according to ValuePenguin, a customers research and finance site.
A report from insurance platform Autoinsurance.com shows that 7% of drivers now spend more on insurance than on household utilities.
The rising insurance costs affect upper- and lower-income households. For people on fixed incomes, car insurances may soon be impossible to pay for, according to Autoinsurance.com.
What can you do to lower your car insurance costs?
The rise of insurance costs come during a time when a lot of consumers are financially struggling after nearly three years of high inflation and rising car prices.
Unfortunately, the insurance prices are not likely to come down anytime soon. Luckily, there are a few things you can consider lowering your car insurance bill.
Go shopping around. It might benefit you to look around and compare insurance quotes.
However, do not opt for the cheapest insurance automatically, because it usually is the state minimum liability only policy, which does not cover your own medical costs or damage to your own car.
Full coverage is important. You can also bundle your insurance policies. Insurers often offer discounts if you have more than one policy with them. You can also ask for discounts.
There are always options for discounts with insurance companies, for example discounts for autopay, kids with good grades or a driver’s education class.
Lastly, you can use telematics. This software monitors your driving style and assigns rates based on safety and mileage metrics.
If you drive safely and fewer miles, you might save money, because the device in your car relays information to your insurance company.