Inflation hasn’t just hit the cost of food and housing—car insurance prices have soared too. From December 2022 to December 2023, auto insurance rates jumped an average of 20.3%, the biggest increase since 1976, according to the Bureau of Labor Statistics. Understanding what’s behind these rising costs might help you find ways to save. Here’s what you need to know about increasing rates and how to keep them as low as possible.
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Yes, inflation does affect car insurance rates. Even though prices in some areas have stabilized recently, car insurance keeps getting more expensive. This is due to a variety of pressures within the automotive industry.
- Higher Auto Prices: New car prices have gone up, and so have the costs for replacement parts.
- Labor Costs: There’s a shortage of qualified mechanics, which drives up labor expenses.
- Claim Costs: Increased repair costs lead to higher claims, pushing up insurance rates.
Why Are Car Insurance Premiums Going Up?
Several factors are contributing to the dramatic rise in auto insurance rates:
- Semiconductor Chip Shortage: The pandemic caused a shortage of chips essential for modern cars. While production is leveling out, the number of chips in each car keeps rising. In 2020, cars had about $500 worth of chips, but that number could hit $1,400 by 2028.
- Rising Health Care Prices: Car insurance covers not just vehicle damage but also injuries from accidents. As health care costs rise, so do insurance premiums.
- Severe Weather: More frequent and severe weather events lead to more claims for weather-related damage.
- Expensive Cars: The average new car price increased by 18% over the past three years, reaching nearly $49,000.
- Repair Costs: Repair costs jumped by about 10% from December 2022 to December 2023.
- Car Rentals: Labor shortages mean longer repair times, so insurers pay for rental cars longer.
How to Lower Your Auto Insurance Rates
Even though car insurance prices are climbing, there are ways to reduce your rates:
- Improve Your Credit Score: Many insurers use credit-based scores to set rates. A higher score might get you a lower rate because people with good credit tend to file fewer claims. Check your credit score for free through Experian.
- Keep a Clean Driving Record: Safe drivers with fewer violations often get better rates.
- Drop Unnecessary Coverage: If you have an older car, consider dropping collision and comprehensive coverage.
- Shop Around: Compare quotes from different insurers. Prices can vary a lot between companies. Use comparison tools like Experian’s to find the best rates.
- Ask About Discounts: Many insurers offer discounts. Make sure you’re getting all the discounts you qualify for.
- Increase Your Deductible: A higher deductible can lower your premium, but you’ll pay more out of pocket if you have an accident.
- onsider Usage-Based Pricing: Programs that track your driving habits can lead to lower rates if you drive safely.
- Drive Less: Pay-per-mile insurance might be cheaper if you don’t drive much.
- Choose Your Car Wisely: Before buying a new car, check how much it will cost to insure. More expensive cars usually have higher insurance costs.
