Here’s Why Your Car Insurance Probably Just Got More Expensive
If your car insurance policy just renewed or is about to renew, it’s likely your rates are increasing more than usual. Many insurers have raised their rates by 6% to 8%, with some insurers increasing rates by double-digit percentages, The Wall Street Journal reported.
But why is this happening? And is there anything you can do to save on your car insurance? GOBankingRates spoke with Josh Damico, VP of insurance operations at the car insurance comparison platform Jerry, to get his insights.
Why Car Insurance Rates Are Soaring
“There are a number of factors driving up car insurance rates currently, most of which stem from the effects of the pandemic,” Damico said. “In 2020, the frequency of accidents dropped and most insurance carriers decided to forgo their annual rate increases, which are around 3% each year.
“In addition, some carriers were giving money back as a benefit to customers during what was a difficult financial time for many. Now, almost two years later, people are back on the road and therefore we’re experiencing an increased frequency of accidents.”
Another factor in increased rates is that the costs of car repairs, replacements and rentals have all increased.
“The cost a carrier has to pay for a claim, which is referred to as ‘severity,’ has gone up,” Damico said. “This is due to inflation, record-high car prices, car parts shortages and high prices and labor shortages.”
If a driver totaled a car today, the insurance carrier may need to reimburse the customer the value of the vehicle.
“New and used car values are at all-time highs and therefore, when a carrier appraises the value of a totaled vehicle, it is much higher than it would have been previously,” Damico said. “This results in the carrier having to pay out more money.”
Also, when a car in an accident is repairable, it costs significantly more to repair.
“Car parts are in high demand and they cost more, and body shops can’t find enough mechanics to hire, driving up the cost of labor,” Damico said. “All of these factors increase expenses in the case of an accident or vehicle theft, which can cause insurance premiums to rise.”
How To Save on Car Insurance
Although rate hikes are pretty much inevitable, there are still steps you can take to save on car insurance.
“Seventy percent of people haven’t re-shopped their car insurance policy, and that means they may be leaving money on the table,” Damico said. “If you aren’t pleased with your current rate, a good first step is to shop around. You can do the work yourself by contacting carriers directly, but that can be time-consuming. The easiest way to compare and buy car insurance is through an app like Jerry. It’s important to remember that you can change your insurance carrier at any time. If your rate increases for any reason, you can shop around for a better rate.”
Is Your Car Due for a Financial Checkup? 4 Ways To Lower Your Expenses
You also should see whether you are eligible for any discounts that you aren’t taking advantage of. This is especially true if you’ve recently experienced a major life change.
“Have you gotten married or moved in with your partner? You can save money with a marriage discount and a multi-car discount when you merge insurance policies,” Damico said. “Do you work from home now? If so, you can reduce your annual mileage and usage, and that will save money on your policy without impacting coverage.”
“Even without a major life event, there may be discounts you aren’t taking advantage of that can help you save money on car insurance,” he continued. “Most carriers offer discounts based on good driving behavior, which is increasingly tracked and measured through an app on your phone using telematics. You’ll usually get a discount for enrolling in the telematics program, as well as additional savings for good driving behavior, without any adverse effects. Also, check the safety features in your car because there may be discounts based on certain safety features.”
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