The Rising Cost Of Auto Insurance — And What You Can Do To Save

Auto insurance rates have been rising recently, substantially outpacing inflation overall. US Department of Labor data shows the widely-adopted measure of inflation, the Consumer Price Index for All Urban Consumers, is 3.7% higher than it was a year ago. Meanwhile, the price index for motor vehicle insurance is 18.9% higher over this same period.

Key contributors to auto insurance price increases are the higher costs of motor vehicle repairs and maintenance, as well as more frequent accidents and increased litigation. While consumers cannot fully control their premiums because of these factors, there are still steps they can take to save.

What Contributes To A Driver’s Auto Insurance Premium?

Driver characteristics are important in establishing an auto policy’s premium. Younger drivers, all else equal, can expect to pay higher rates due to inexperience behind the wheel. Male drivers generally pay higher rates, though an increasing number of states prohibit the use of gender in setting premiums. Consumers with lower credit scores can also expect higher auto insurance rates in most states. While controversial, insurers claim low credit scores are predictive of the likelihood a customer makes a claim.

Where the insured individual lives and garages the vehicle also matters as risks vary substantially due to geography. Personal driving records including past tickets and accidents additionally factor into an insurance premium. Individuals with prior moving violations or claims can expect to pay higher rates, as will those with more expensive vehicles.

What Can Drivers Do To Save?

Some items that factor into auto insurance rates are easier to control than others. Age and credit scores cannot be raised quickly in an attempt to get better rates. Drivers cannot easily move to a city or state where prices are lower. Drivers can, however, easily comparison shop, through insurer websites. While convenient, this approach may not be ideal given there is limited guidance from an insurance professional. Independent insurance agents can provide quotes for many carriers at one time and do the comparison shopping on behalf of the client. One phone call can therefore result in many options across many reputable insurance carriers.

Some insurance programs, such as Allstate’s
ALL
Milewise and Progressive’s
PGR
Snapshot, monitor a driver’s activity and offer better rates to safer drivers. The insurers provide a small device that the client plugs into their vehicle’s diagnostic port. The device then monitors how often the vehicle is used, when the vehicle is used, and sudden braking or quick acceleration. Drivers who drive fewer miles, drive during the day and during non-peak hours, and accelerate and brake carefully may qualify for additional discounts.

Consumers may also consider raising their deductibles, the amount one pays out-of-pocket prior to collecting from the insurer after a claim. While doing so can lower the premium, this should be done with caution. Raising the deductible too much can leave drivers with high bills following an accident or loss.

Insurers also offer a number of discounts. To earn a multi-policy discount, consumers may consider bundling their auto insurance coverage with their homeowners policy. Students may get a discount for having good grades or for earning an advanced degree. Active and retired military service members often qualify for lower rates. Certain administrative actions such as paying the policy premium in full up front or enrolling in paperless statements can also reduce premiums.

Rising prices have permeated the economy, and auto insurance prices are no exception. While much of those price hikes are beyond the consumer’s control, there are still these opportunities to save. However, failing to maintain adequate coverage or shopping on price alone is never advisable. Speak to a trusted and licensed agent to discover other ways to manage the rising costs.