Some drivers have seen their car insurance rates increase since the beginning of the year. While insurance premiums are highly personalized, research shows that the average cost of car insurance is on the rise due to inflation, shortages, and changes in driving behavior. Higher auto insurance rates can be financially challenging, especially since liability insurance is required in 48 out of the 50 states. Read on to learn why car insurance rates are increasing and how to keep insurance affordable.
How Inflation Affects Car Insurance Rates
Inflation affected almost every sector of the economy last year, including the new and used car market. The price for new cars rose by approximately 11.8%, while used car prices increased by 37.7%. Cars are also becoming increasingly complex, and therefore more expensive. Advanced driver assistance systems (ADAS)—cars that assist with parking and driving—use small parts and monitors that are growing in popularity. These parts can cost thousands of dollars to repair in the event of an accident.
In addition to vehicle costs, healthcare costs are also rising. If any parties are injured in an accident and require a trip to the hospital, their treatment will likely cost more than it did a few years ago. Since insurers cover property damage and bodily injury post-accident, rising medical bills and vehicle repair costs will likely increase the price of the average claim, resulting in higher insurance premiums.
Shortages and Their Impact on Insurance Rates
Since the onset of the pandemic, multiple businesses have been suffering from labor and supply chain shortages. Disruptions have made it harder to find specialized parts and qualified mechanics, which means auto shops are currently paying more for both. This increases repair costs and puts the burden on insurers to pay for more expensive claims, which is often reflected in your premium.
Changed Driving Habits Have Affected Insurance Rates as Well
At the beginning of the pandemic, driving frequency was at an all-time low as many drivers stopped commuting. As a result, there were fewer accidents and claims, and insurance was generally cheaper. However, now that the pandemic is waning, pre-pandemic driving habits are returning—for better or worse. Distracted driving and driving over the speed limit are on the rise, and multiple states have created initiatives to try and tackle speeding. Some insurers are increasing their rates to offset the higher risk of paying a claim due to rising accident rates.
Can You Still Find Affordable Insurance?
If your insurance is on the rise, here are some things you can do to keep your rates affordable:
- Compare quotes. Your policy is based on a few different factors, including age, driving history, zip code, vehicle type, and more. Since every insurer calculates premiums differently, it helps to shop around and compare quotes to see if you’re getting a fair rate.
- Ask about discounts. Most insurance companies offer discounts for bundling your policies, maintaining a good driving record, taking a defensive driving course, and more.
- Raise your deductible. Increasing your deductible—the amount you pay after making a claim before your insurance policy kicks in—will lower your premiums. Be realistic about what you can afford to pay out of pocket, as you don’t want to be in hot water in the event of an accident.
- Choose an affordable car. Premiums are partially based on your vehicle’s characteristics, including price, repair costs, rates of theft, and safety ratings. An affordable car with a high safety rating will be less expensive to insure than a luxury vehicle.
If you’re looking for cheap auto insurance, you can find affordable coverage with a policy from The General. We have a range of different policies for every driver, including drivers with imperfect credit and driving records. Visit our blog to learn more or get an insurance quote in under two minutes and see how much you can save.