Inflation may be falling — but not the cost of your car insurance
By Jeanne Sahadi, CNN
If you think news that inflation is easing means you’re not going to get hit with any more higher prices, think again.
At least, that is, if you’re paying for car insurance. There’s a very good chance your premiums this year will go up … by a lot.
The average cost of full coverage auto insurance has hit $2,014 a year nationally, up nearly 14% from last year, according to Bankrate’s annual True Cost of Auto Insurance Report, released Monday.
Why? It’s a lagging effect of high inflation from the last two years that resulted from labor and parts shortages, which in turn drove up the cost of paying insurance claims on car repairs and related insured expenses.
“Car insurance rates are reactionary,” said Cate Deventer, Bankrate’s insurance analyst.
But the good news, she added, is this: “If inflation keeps cooling we could see insurers file for rate decreases in future years.”
Beyond inflation, other factors will affect your bill
Plenty of other factors may increase your individual premium.
For instance, putting your teen child as a driver on your policy will jack up the rate.
Ditto if you got into an accident, had speeding tickets or were convicted of a DUI.
Expect to pay more, too, if your credit score fell or you let your auto coverage temporarily lapse.
Location, location, location
Another big factor in how much your premiums will cost is where you live.
“Each geographic area has different risks and costs of living, [so] the cost for car insurance varies across the nation,” Deventer said.
Among major metro areas, Bankrate found that average 2023 premiums rose the most in Orlando, Florida (up nearly 23% to $3,078), followed by Phoenix (up nearly 17% to $2,164). They fell the most in Philadelphia (down nearly 22% to $1,872) and New York City (down 14% to $2,649).
Meanwhile, as a percentage of average household income, drivers living in Miami now pay the most — 5.51%, or $3,447. Drivers in Boston, meanwhile, pay the least -— just 1.32% of average income, or $1,328.
How to reduce your car insurance premium
While you can’t control the effects of inflation or location on your premium, there are other things you can do to keep your costs to a minimum, Deventer said.
Look for discounts: Every auto insurer provides them and there are many kinds.
For instance, you may score a discount if you take a defensive driving course.
Or if the teenager on your policy goes away to boarding school or college and can’t drive your car, your insurer may offer a “student away” discount. And if they aren’t away, but attend school full-time and get good grades through age 24, that may save you a few bucks, too, Deventer said.
In any case, if your insurer doesn’t provide you a full list of options, ask to see what’s available to you.
Shop around: If you’re unhappy with your premium, see if another insurer will give you a better deal, especially if you have a great driving record. “Every company uses a different algorithm to determine rates,” Deventer said.
(The full Bankrate study can be found here.)
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