After experiencing a slight break at the height of the pandemic, motorists in the US are once again bracing for a sharp rise in auto insurance premiums.
The average annual car insurance rate currently stands at $1,655, according to a recent analysis by consumer financial services firm Bankrate, but experts warn that rising inflation and an increase in road accidents as more vehicles hit the road are likely to push up premiums even higher in certain states.
In Texas, for example, some insurance providers have laid out plans to increase rates by an average of more than 20%, according to the Texas Department of Insurance. In Arizona – one of the few states that do not require insurers to seek government approval for hikes – major carriers Geico and Allstate have pushed up rates by 8% and 7%, respectively.
In its latest report, independent insurance comparison site The Zebra listed Louisiana ($3,265), Michigan ($2,639), and Florida ($2,425) as the states with the highest annual auto insurance premiums, while New Orleans ($3,532), Baton Rouge ($3,473), and Alexandria ($3,202) – all in the Bayou state – topped the list of cities.
While location is a key factor in determining premium prices, the Insurance Information Institute (III) has noted that motorists are likely to experience rate hikes this year, regardless of where they live.
“Auto premiums have not kept pace with inflation – especially when it comes to auto replacement part costs,” said chief executive officer Sean Kevelighan in a statement. “Auto insurers are seeing the frequency and severity of automobile accidents rise quickly as drivers return to the nation’s roadways. After these accidents occur, the claim payouts are higher due in part to the higher price of auto replacement parts.”
The situation has prompted many drivers to search for ways to lower their premiums. To find out how this can be done effectively, Insurance Business checked out the websites of several consumer finance companies for practical tips and advice. Here’s what they say drivers should do to get the best coverage at the cheapest possible rate.
Because each driver’s profile and circumstances are different, according to personal finance firm NerdWallet, “no single insurer is the low-price leader for everyone.” It added that an insurance provider that offers the cheapest policy for one person might be the most expensive option for another in a different state.
“The only way to ensure you’re getting the lowest rate possible is to compare car insurance rates,” NerdWallet advised.
The internet is replete with insurance comparison websites that are easily accessible to motorists. A 2020 analysis by the company illustrates how using these websites can help drivers pick the cheapest policies with the best coverage.
NerdWallet compared rates from a hypothetical 40-year-old driver buying a full coverage policy on a 2018 Toyota Camry LE. The driver also has a good credit history and a clean driving record, earning a safe driver discount from most car insurance companies.
The study found that in Florida, State Farm’s auto insurance premiums averaged $1,766 annually, which was the cheapest rate in the state for a driver without a military connection while Geico’s average rate was $239 higher. But the opposite was true in California, where Geico offered the cheapest average rates at $1,458, while State Farm’s premiums were $423 higher. In New York, Progressive is the cheapest option for drivers, with annual auto insurance rates averaging at $1,298 but in Florida, its policies were the most expensive at $3,015.
NerdWallet also recommended that motorists consider local and regional insurers as these often have higher customer satisfaction ratings and offer lower rates compared to large players.
Car insurance providers offer a range of discounts, which motorists can take advantage of to reduce their annual premiums. Drivers can often avail of these through:
Auto insurance companies also offer a range of coverage options that impact how much premiums will cost. Automotive digital media group Motor1 suggested ditching the coverage so that the driver might not need to cut rates.
“You may be tempted to add on optional coverage but sticking to the basics can greatly lower your rates,” the group wrote on its website. “For example, you can remove or reduce medical payments coverage. If you and your family are already covered by health insurance, you may not need to worry about this add-on. Also, you may not need rental car reimbursement if you’re prepared with another car or take public transportation when your vehicle is getting worked on.”
Financial website Investopedia also advised owners of older vehicles to skip collision and comprehensive coverage as the maximum payout under either policy is limited by the car’s value.
“[If] the vehicle is to be involved in an accident, the insurance company would likely total the car,” the firm noted. “If the value of the car is only $1,000 and the collision coverage costs $500 per year, it may not make sense to buy it.”
Maintaining a clean driving record is among the best ways motorists can access affordable car insurance rates.
“Safe drivers prove to auto insurance companies they are not at high-risk for getting into an accident,” according to Motor1. “This means they will most of the time be cheaper to insure.”
Safe driver discounts vary between insurance providers. Motorists can access between 10% and 25% reduction in premiums for adopting safe driving practices.
In most states, insurers use a person’s credit score in calculating premiums. According to Michael Barry, chief communications officer and head of media relations and public affairs at III, this is done because there is a correlation between a driver’s credit rating and the chances of filing claims.
“Many insurers use credit-based insurance scores,” Barry told Investopedia. “It’s a contentious issue in certain statehouses...[but] insurers will say their studies show that if you’re responsible in your personal life, you’re less likely to file claims.”
An analysis by NerdWallet also found that having poor credit can increase motorist’s insurance rates by hundreds of dollars a year compared with having good a credit score.
A higher deductible means motorists will pay lower premiums. But this also increases the amount they need to pay before their auto insurance picks the tab in the event of an accident or theft.
“Be mindful of taking this route to make sure you have enough saved up in case an emergency repair is necessary,” Motor1 advised.
Some cars are more expensive to insure than others. For motorists looking to save on car insurance costs, Motor1 recommends checking out sedans, vans, and other family-friendly vehicles as these often have the lowest premiums.
For those who already own a vehicle with high insurance rates, one option is to downsize, according to Investopedia.
“Buying a huge SUV may sound exciting, but insuring a 5,000-pound, top-of-the-line vehicle can be more expensive than insuring a small (but safe) lower-cost commuter car,” the firm explained.
According to consumer websites, enrolling in a usage-based insurance program is beneficial for drivers who log fewer than 10,000 miles every year. This is often done with the insurer installing a telematics device in the vehicle. This device, also called a black box, tracks driving behavior, allowing motorists to access discounts based on when, how well, and how much they drive.
Using mass transit reduces how much a person drives their vehicle, which may also have an impact on premium prices. Investopedia suggests taking public transportation if possible, “to rack up fewer miles, [but] keeping in mind that you will usually have to decrease your mileage significantly before incurring a discount.”
For drivers who had already chosen a car insurance policy, Motor1 advises to “not lock yourself in.”
This guide provides a checklist how to find the right car insurance policy for your unique needs. Read more here.
“Car insurance rates change often so that companies can stay competitive and get new customers,” the firm noted. “It can be a great idea to review your policy every time it renews, whether that is every six months or every year. Get at least three different quotes to find the best car insurance rates. Then, you can change your auto insurance carrier if you find a better rate.”
Motor1 added that asking friends for recommendations also works as these word-of-mouth reviews can sometimes be “the most valuable and accurate.” The company cautioned, however, that what suits their friends might not be the right one for them, considering the differences in each person’s profile and circumstances.
