Car insurance costs are on the rise. Here's how to avoid higher rates

Car insurance prices may be rising but you can still find the best available rate for your vehicle.

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Barry EitelContributing WriterBarry Eitel a contributing writer at Policygenius covering personal finance and other topics.

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Experts expect inflation will hit drivers’ wallets with another increasing cost: auto insurance rates.

An analysis from S&P Global Market Intelligence reports dozens of major providers, including Progressive, Allstate, and GEICO, have received approval to increase auto insurance rates from state regulators. [1] Some insurers are boosting premiums 6% to 8%. Others plan double-digit spikes. [2]  

Auto insurance rates are rising for two reasons: greater car repair costs and more drivers returning to the road. The average annual cost of car insurance hovers around $1,638 per year for 30- to 45-year-old drivers, but this price can vary based on your location, age, and driving record. 

You can better position yourself to get the best rates available by understanding the changing market and comparing insurance rates, even if you already have a policy.  

Why are auto insurance rates rising?

At the start of the pandemic car insurance rates decreased because people started working from home and canceling travel plans. As pandemic-related restrictions started to lift, more people returned to the roads, causing more collisions and more auto insurance claims. 

Due to supply chain issues and increased demand, the cost of cars and car parts are spiking. The cost of new cars has risen 14% from the end of 2020 [3] , while the cost of used cars has jumped 43%. On top of increasing costs, there are fewer [4] car mechanics, making it more expensive to repair your vehicle.   

Car insurance rates may be rising but there are still ways to save.

How to save on car insurance  

1. Shop around

The best way to know if you’re getting a good deal on car insurance is comparing quotes. If you think you’re not getting the best deal from your current provider, shop around for a new policy. Policygenius can help you compare prices based on your location, age, vehicle, and other factors.   

Some state governments also provide online car insurance quotes, says Billy Hatton, a certified financial planner and founder of Billfold Budget Counseling.

“If you're unsatisfied with your current insurance coverage and feel you're paying too much, many states have sample quotes for auto insurance on their respective Department of Insurance websites,” Hatton says. “The department of insurance for your state may also have information regarding low-cost auto insurance programs as well that some folks may qualify for.”

2. Change coverage limits & deductibles

When choosing your insurance policy, you can change the cost by altering your coverage limits and deductibles. If you lower your coverage limit, you will likely lower your rate because plan covers less damage. Similarly, increasing your deductible will likely lower your rate because you are agreeing to pay more out of pocket when a covered loss occurs.

“The best way to lower premiums is adjusting coverage,” Hatton says. “An area I recommend often is removing collision coverage if your car is already paid off and you have enough savings for the down payment for a new car.”

Of course, there are financial risks associated with reducing your coverage and increasing your deductible. In both cases, you are agreeing to pay more even if your loss is covered.   

3. Take advantage of discounts & bundling

Many insurers offer discounts for various reasons, including if you have a good driving record, are a member of an affiliated club, or agree to pay an annual policy in full upfront. You might also be able to save money by bundling car insurance and other forms of insurance policies together with a single insurer, Hatton says.

How to insure a car you just bought

If you just purchased a new or used car, you’ll want to buy an insurance policy immediately. If you already have an existing car insurance policy, insurers will typically give you a grace period to add a vehicle, but it can be as short as 24 hours in some states.

If you don’t have an existing car insurance policy, it’s illegal to drive unless you live in one of the two states that don't require coverage. You should look up rates online, adjust coverage levels, and compare companies. You can even do this before you buy a car and have the coverage set up to start the day you drive your car off the lot.  

If you already pay car insurance for other vehicles, adding another vehicle can often be done online or through a representative. This is a good opportunity, though, to see if you can get better rates for your vehicles with another company.

Stay in touch with your insurer

Many insurers issued partial refunds on premiums paid during the height of the pandemic in 2020. Although most of these have been paid out, if you never received a refund, it is worth checking with your insurance representative to see if you are owed some money. 

If you are driving less because you are working from home, you might be eligible for lower rates due to your reduced annual mileage. Regularly check in with your insurer to ensure you’re getting the best rates, discounts, and bundling offers.   

Image: Thomas Barwick / Getty

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