Four Ways to Save Money on Car Insurance as Rates Rise

Drivers who have complained about high gas prices can now shift gears and bitch about car insurance rates instead.

While the average cost of a gallon has fallen about 26% since June, auto insurance premiums have risen An average of 8.3% year-over-year, according to S&P Global Market Intelligence. Inflation is only partly to blame.

Compared to the peak of the pandemic, more Americans are again driving more miles, leading to higher rates of serious accidents, fender flares and road rage, said Dale Porfilio, chief insurance officer at the Insurance Information Institute, an industry trade group known as Triple-I. Auto crime has also increased, including theft of valuable parts such as catalytic converters. According to the National Insurance Crime Bureau, a nonprofit organization focused on fighting insurance fraud and crime, 932,329 vehicles were reported stolen in 2021, a 17% increase since 2019.

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These factors, coupled with rising prices for new and used cars, have pushed the average annual cost of auto insurance to $1,771, according to Bankrate. And premiums are expected to rise another 5% to 10% in 2023, Triple-I estimates.

Those premium increases are driving higher costs for parts, labor and evolving technological sophistication that is making new vehicle repairs more expensive, Mr Porfilio said.

Auto insurers use several factors, many of which are beyond a driver’s control, to set rates. Because of higher rates of vandalism, theft and accidents, city drivers typically pay higher fees than those in small towns or rural areas, he said.

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According to a recent analysis, the most expensive states for auto insurance are Louisiana, where drivers pay an average of $2,986 per year, Florida ($2,775) and Nevada ($2,489). by NerdWallet inc

The cheapest states are Idaho ($1,027), Ohio ($1,066) and Vermont ($1,074).

Whether you’re insuring a new vehicle or looking for a cheaper option when you need to renew your policy, you can lower your insurance rate. Here are four steps to consider:

Reduce your cover

Prior to the pandemic, owners of older vehicles typically discontinued accident and comprehensive insurance after about six years. But since the pandemic, used cars have risen in price, so owners need to be more careful about when to forego those options, Mr Porfilio said.

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A good rule of thumb is to multiply your older car’s insurance premium by 10. If that number is higher than the value of the car itself, Triple-I says collision or comprehensive insurance may not be worth it. For example, a 2013 Honda Pilot has a trade-in value of $7,691 according to the Kelley Blue Book. If you’ve been quoted an annual premium of $1,000, you may want to pass on comprehensive coverage.

Chris Diodato says he recently ditched collisions and extensive coverage for his 15-year-old 2008 Hyundai Sonata, saving about $600 a year. The financial planner in Palm Beach Gardens, Fla., said his car’s estimated resale value is less than $2,000, so he felt it made financial sense to forego the additional coverage.

Get at least three quotes from insurers before purchasing a policy, according to the AAA.


Photo:

Jon Cherry/Getty Images

Increase your deductible

If you have a lower deductible, say $250, a solid emergency fund, call your insurer to find out how much increasing your deductible would lower your rate, said Lauren Lindsay, a financial planner in Houston. A deductible is the amount you pay for repairs before your insurance kicks in.

A client of Ms. Lindsay saved $480 annually in premiums by increasing the deductible from $500 to $2,500. The customer chose this because her two sons are grown and have their own car insurance. The client also saved about six months of expenses in an emergency fund.

Ms. Lindsay suggests saving at least three months’ expenses in an emergency fund before pursuing this option.

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Browse around, claim discounts

Get at least three quotes from insurers before purchasing a policy, according to the AAA.

Steve Sivak, a financial planner in Pittsburgh, encourages his clients to spend two hours shopping each year, which usually gets them a cheaper option.

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What advice do you have for keeping car insurance premium costs down? Join the conversation below.

Jim Ciprich, a father of two from Florham Park, NJ, has saved his insurance by about 5% after taking advantage of his airline’s “good student” discount by giving his agent a copy of his seniors’ grades twice a year daughter sent. Most airlines that offer the good student discount charge an average of B or better.

When his daughter started college this fall, he was eligible for an away at school discount since she didn’t have a car on campus, which saved him about $157 a year.

Some insurers will give you a discount if you buy two or more types of insurance with them — like homeowner and auto — or insure more than one vehicle, Mr Porfilio said.

Share driving data

Installing a device in your car or using a smartphone app that tracks behavior on the road can also reduce premiums.

Most major insurers including Progressive Corp., Allstate corp

, Nationwide, Farmers Insurance Group, and USAA now offer programs that log behaviors such as hard braking, rapid acceleration, and idle time. Participation in usage-based insurance programs that rely on technology to monitor driving habits and assign risk has doubled since 2016, with 16% of auto insurance customers enrolling in such initiatives, according to a recent JD Power survey.

The safer you drive, the more you’re likely to save, said Cate Deventer, an insurance analyst at Bankrate.

According to a recent NerdWallet analysis of statewide auto insurance rates, a driver with a self-inflicted accident pays an average of $832 more per year for full coverage than a driver with no traffic violations.

Some companies may levy surcharges if your driving data indicates above-average risky behavior. So be sure to check the company’s regulations, Ms Deventer said.

Write to Veronica Dagher at [email protected]

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