The cost of car insurance has been rising in recent years, and this trend is projected to continue. According to research from J.D. Power, the percentage of customers who have experienced an annual rate hike of over $200 per vehicle has more than doubled in the past four years.
Why is car insurance is so expensive?
Spiking rates are due to a variety of factors. In addition to insurers having to recoup losses from hurricanes, people are driving more, which is causing more accidents, and that means higher costs for insurance companies, which is then passed on to you in the form or rate hikes. Also, repair and medical costs are increasing, making accidents generally more expensive. Consider the following:
- The National Safety Council’s annual report, “Injury Facts” showed that the percentage of car crashes classified as “one vehicle colliding with another” climbed to 73 percent in 2014, a 20-year high. This means that there are more accident claims and it can results in an increase of costs for insurers. Additionally, According to Nielsen, the percentage of households that filed at least one auto insurance claim in 2017 increased from 20.5 percent in 2014 to 22.2 percent and predicts that it will further rise to 22.5 percent by 2022. These factors can lead to higher premiums for car insurance.
- The rising cost of vehicle repairs, specifically due to the inclusion of high-tech headlights and safety features, is leading to an increase in insurance costs. A study by State Farm found that the cost of body work has risen nearly 40% more than overall inflation and the size of collision claims increased 8.2% from 2014 to 2016.
10 tips on how to lower car insurance costs
Despite this troubling trend, the road ahead in 2019 won’t be without savings if you take the following advice on how to lower car insurance costs, courtesy of Insurance.com Consumer Analyst Penny Gusner.
1. Maximize your auto insurance discounts
Car insurance discounts vary by company and can include discounts for low-mileage, safety features, multiple cars on the policy and long-term customers. Some of the common discounts include a low-mileage discount for driving less than 7,500 miles per year, a multi-car discount for insuring more than one car, and a discount for safety features such as anti-lock brakes and anti-theft devices. Other ways to save include through affiliate group memberships and staying with the same insurance company for a number of years.
2. Take a defensive driving course
If you have a good driving record, taking a traffic class may lower your car insurance rate. Insurers usually give a discount of 5% to 15% on liability and collision coverages for three years. However, there may be restrictions depending on state laws and the insurance company. For example, only drivers over 25 may be eligible, or all drivers on the insurance policy must take the class to qualify. Traffic school classes usually last 4-6 hours and can be taken in person, online, or both. They typically cost between $25 and $75 and cover topics such as traffic safety. Typically, taking a driver safety class will either remove points from your driving record for minor violations or give you a discount, but not both. New York is an exception, where drivers can reduce the number of violation points by up to 4 and receive a 10% discount on auto liability and comprehensive insurance by taking a state-approved accident-prevention course, but this can only be done once in any 18-month period.
3. Increase your deductible
Increasing your deductible, which is the amount you pay before insurance coverage kicks in, can lead to a discount on your car insurance premium. According to the Insurance Information Institute, raising your deductible from $200 to $500 can lead to a 15-30% discount, and raising it to $1,000 can result in a 40% discount. However, this typically applies only to the comprehensive and collision portions of your policy and not the entire policy amount. Savings also vary depending on the state, the cost of coverage after other discounts, driving record and the cost to repair or replace the car.
4. Keep an eye on your credit report
Your credit history can affect your car insurance rates in some states. Insurance companies use credit history as one of the factors to determine rates. If you have a good credit history and pay your bills on time, it can help you get lower auto and home insurance rates. A study by Insurance.com showed that on average, drivers with good credit pay 17% less than those with fair credit and 67% less than those with poor credit. However, if you have poor credit, don’t worry, there are ways to improve your credit and lower your car insurance costs. Tips for this can be found in the Car insurance guide for bad credit.
5. Drive safely
If you have had no accidents or traffic violations in the last three to five years, you may be eligible for a price break on your car insurance policy. A single speeding ticket can result in an 11-13% increase in your car insurance rates, depending on the speed you were driving, the speed limit, and the laws of your state.
6. Buy a safe car
Car insurance rates are largely determined by the risk associated with a particular car model. Factors such as the number of claims filed by drivers of the car model, as well as its safety features, are taken into account when calculating rates. To find out how safe a vehicle is and what crash-avoidance safety features it has, drivers can visit the Insurance Institute for Highway Safety’s Vehicle Safety Ratings page.
7. Bundle with home insurance
There are a few key factors that influence these discounts. First, the insurance companies consider married drivers and homeowners to be lower-risk individuals, which means they file fewer claims and receive less discounts. However, if you own your home, you can save even more by purchasing your home insurance and auto insurance from the same provider.
8. Pay-in-full discount
If you pay your car insurance policy premium up front and in full, before the policy effective date you usually get a 5 percent to 10 percent discount.
9. Drop comprehensive and collision if you don’t need it
Collision and comprehensive coverage for car insurance are options and not mandatory. Collision coverage pays for repairs to your car if you are involved in an accident, and comprehensive coverage pays for damages caused by events such as fire, flooding, animal strikes, and hail. However, these types of coverage may not be necessary if you don’t own a new car or if your car is more than 10 years old or worth less than $3,000. These coverage types can be costly, with collision coverage typically costing around $488 per year and comprehensive coverage costing around $172 per year on average, as reported by the Insurance Information Institute.
10. Shop around by comparing car insurance quotes online
Different car insurance companies will charge different prices for a policy, so it’s worth comparing different options to find the lowest rates. Each insurer has its own method for determining rates, so the cost of insurance can vary significantly between different companies. Even if you have been with your current insurer for some time, it’s always good to check with other companies, as life changes and accidents might be assessed differently, and you may be able to find a better deal elsewhere. Therefore, it is very beneficial to compare car insurance rates among different companies.
- You got married
- You moved
- You had an accident
- You bought a car
- You’re adding a teen driver to the household
You should always get at least three quotes and be sure to compare the same amount of coverage across the board. You’ll also want to take into account the customer service ratings of companies you’re considering.