The Cost of Car Insurance Is Up, Here’s How to Bring It Back Down - Rodgers & Associates
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The Cost of Car Insurance Is Up, Here’s How to Bring It Back Down

The average cost of car insurance is now up to $2,150 per year for full coverage.1 While inflation rose by 3.2% last year, according to Social Security, car insurance rose by 21%.2 The last time we saw increases like this was in 1976. There are several explanations:

  • Overall inflation. Inflation took off after COVID, which finally got the Federal Reserve’s attention in 2022. The Fed raised interest rates in 2023 to control inflation, but we still feel the impact in specific markets. The net effect is that nearly every­thing costs more, including the cost to insure a vehicle.
  • Smarter cars. Cars today are practi­cally computers. Having the technology to make our cars safer (sensors, cameras, radar, and trans­mitters) is wonderful. Yet these advance­ments make the cars themselves—and the cost to repair them—more expensive. Inflation data shows that repair costs rose 6.7% last year.
  • Accident claims. You might expect smarter cars to result in fewer accidents. However, there were 5,250,837 colli­sions reported in the last year3—a 13.6% increase from before COVID. More people are getting involved in auto accidents, and each accident costs more than it did previ­ously (for reasons stated above). Not surpris­ingly, distracted driving is a strong contributor to this trend.
  • Driving more. The average annual distance driven by Americans has now reached 14,263 miles,4 equiv­alent to almost three round trips from Lancaster to Los Angeles. This figure dipped to less than 12,700 during COVID and was expected to stay down due to people working from home, but this hasn’t proven true.

Where you live also affects auto insurance premiums. Natural disasters such as tornadoes and hurri­canes have become a risk to drivers in some states where auto repairs are more costly. Drivers in Louisiana and Florida are experi­encing the largest premium increases, while drivers in Wyoming are seeing an average decrease in premiums year over year.

So, apart from moving to Wyoming, what can you do to lower your auto insurance premiums? Fortu­nately, there are several factors you can control.

  1. Consider your vehicle model and year. The type of vehicle you drive greatly impacts the cost of car insurance. A vehicle that costs more to repair or replace will likely have a higher premium. Likewise, an automobile with a higher likelihood of accidents, like a sports car, will also cost more to insure. The five cheapest cars to insure are the Subaru Forester 2.5i Wilderness, the Hyundai Venue SE, the Honda CR‑V LX, the Mazda CX-30 S, and the Toyota C‑HR XLE.5
  2. Prior­itize safe driving. Pay attention to your speed, obey all traffic signs, drive defen­sively, and limit distrac­tions. A clean driving record and good claim history will help you get the best rate for your situation and might also qualify you for additional discounts. Sometimes insurance companies also provide discounts to drivers who complete an approved defensive driving course.
  3. Adjust your coverage levels. Dropping your compre­hensive and collision insurance might make sense if you drive an older vehicle. If you have adequate savings to cover repairs, raising your deductible will reduce your premium.
  4. Opt for a pay-per-mile policy. Do you drive less than 10,000 miles per year? Mileage-based insurance allows you to pay a flat monthly rate to keep your policy active and a small fee for every mile driven. These policies often require you to install a small device in your vehicle that transmits your odometer reading.
  5. Ask your agent about discounts. Most insurers offer a wide range of car insurance discounts, which fall into three overall categories: policy discounts, driver discounts, and vehicle discounts. See which discounts are available for your situation.
  6. Bundle with another policy. Having multiple policies with the same insurance company can be beneficial. When you purchase an auto insurance policy from the company that also holds your homeowner’s insurance, you can often get a signif­icant discount on one or both premiums. In some cases, bundling policies can save 15 to 25% on premiums.

Finally, shop around regularly. Quote compar­isons can help determine which car insurance company offers the best rate for your desired coverage. A survey found that 49% of drivers shopped for a new car insurer in the past 12 months. Of people who switched insurers, 26% of drivers saved 10% on a new policy and 29% of drivers saved 15%.6

Insights:

  • Cars today are more expensive to replace and repair. Due to newer technology, parts cost more and service is more complex, requiring well-trained technicians.
  • Where you live in the country plays a role in the cost of auto insurance premiums.
  • A clean driving record and good claim history can help you get the lowest rates.
Footnotes
  1. Average Cost of Car Insurance 2024. Forbes Magazine, January 5, 2024. 
  2. What’s behind the rapid increase in car insurance rates? CNN Business, March 13, 2024. 
  3. National Highway Traffic Safety Admin­is­tration: National Statistics. 
  4. Federal Highway Admin­is­tration, February 9, 2024. 
  5. Quadrant Infor­mation Services. 
  6. Drivers are switching car insurance carriers as inflation continues to rise. CarIn​surance​.com, April 1, 2024.