Saturday, February 24, 2024

Americans Are Buckling under the Strain of Soaring Car Insurance Rates in 2023

As prices for everything from consumer goods to fuel continue to rise and the threat of a recession looms, car insurance has proven to be no exception. According to statistics, car insurance rates rose by an average of 14% in 2022, and are expected to rise by another 8.4% in 2023. As a result, the average annual cost of car insurance is around $2,000.

Many Americans are already feeling the squeeze from the overall rise in the cost of living, and with car insurance mandatory almost everywhere in the US, it’s not an expense one can comfortably forego. Not only is it a huge legal and financial risk to go without auto insurance, it leaves you without the many benefits of having your car protected by insurance.

So what’s causing this increase in insurance rates, and what can you do about it? Read on to learn more.

How Much Should You Be Spending?

Car ownership can be an expensive proposition. A general rule of thumb is to not spend more than 10-15% of your income on vehicle expenses. This includes car loan repayment, insurance, fuel, maintenance and so on. Car insurance already takes an average of up to 3% of your income, so it’s a good strategy to try to keep that down as much as possible.

What’s Causing the Increase?

So why are insurance rates going up nationwide? A few reasons.

First of all, the post-pandemic recovery has put a lot of cars back on the road, which means more traffic and opportunities for accidents. But some after-effects of the pandemic are still being felt, particularly in the supply chain. Some auto parts are still difficult to get hold of, meaning the cost of repairs is up nearly everywhere. It’s gotten bad enough that there was even a recent rash of catalytic converter thefts.

Of course, inflation has played a large part as well, driving up costs everywhere.

Where You Live Matters

In addition to the larger forces at work driving up insurance costs, there are also more individual reasons why your insurance premiums might go up: driving record, marital status, and even your credit rating. Some of these factors are within your ability to control (or at least influence) while others are not. For instance, where you live can make a major difference in your car insurance premiums — whether it’s city, state, or even zip code.

Why? For one thing, insurance premiums are based on risk assessment, and different areas carry different levels of risk. A major urban center with high traffic density or crime statistics could bring your insurance premiums up. Similarly, an area with a propensity for certain natural disasters, or a high percentage of uninsured drivers, can raise premiums for entirely different reasons.

For example, Florida drivers tend to pay a lot more in auto insurance premiums — an average of over $2,400 a year — because many of these factors (uninsured drivers, natural disasters, traffic density) are at work in the state. By comparison, you’ll have a much easier time finding cheap car insurance in Ohio — per numbers from Renata Belasco at The Zebra, drivers in Ohio pay an average of only $1,028 per year. That’s 33% lower than the national average.

How Can You Save on Car Insurance Costs?

For a number of reasons, it’s a bad idea to go without car insurance. Not only is it against the law in most states, but it also leaves you open to court damages, runaway medical bills, and worse. Fortunately, there are some measures you can take to try to keep your insurance costs down.

If things are very tight for you financially, one drastic step you might consider taking is becoming a one-car household, or “trading down” your current vehicle for one that’s cheaper to insure, i.e. an older vehicle or one with a better safety record.

While that may be a big step, there are some other strategies you can use to bring down your insurance premiums:

  • Take out a multi-vehicle policy on your cars.
  • Bundle your car and home insurance together, which will usually result in a discount from most insurers.
  • Shop around and compare quotes for cheaper car insurance.
  • Ask your insurer about any discounts you may be eligible for, such as good student discounts, occupational discounts, military veteran discounts, and more.
  • Maintain a clean driving record as much as possible. Not only do you get a discount for it, but traffic violations can result in a substantial rate hike in your premiums.
  • Take a defensive driving course or install additional anti-theft or safety equipment on your vehicle.

Keeping your car insurance affordable in the current economic climate can be a tough proposition — but if you need your car to get by, don’t be tempted to cut costs by going without insurance.