Car insurance prices have been rising recently, significantly outpacing inflation in general. The U.S. Labor Department data showed that a widely used gauge of inflation, the consumer price index for all urban consumers, was 3.7 percent higher than it was a year ago. Meanwhile, the auto insurance price index was 18.9% higher over the same period.
A major contributor to the increase in auto insurance prices is the higher cost of repairing and maintaining motor vehicles, as well as more frequent accidents and increased litigation. While consumers cannot fully control their premiums due to these factors, there are still steps they can take to save.
What contributes to a driver’s car insurance premium?
Driver characteristics are important in determining the auto policy premium. Younger drivers, other things being equal, can expect to pay higher rates due to inexperience behind the wheel. Male drivers generally pay higher rates, although more states are banning the use of gender in setting premiums. Consumers with lower credit scores can also expect higher auto insurance rates in most states. Although controversial, insurers claim that low credit scores predict the likelihood that a customer will make a claim.
When the insured lives and garages, the vehicle also matters, as risks vary greatly by geography. Personal driving records, including past tickets and accidents, are additionally factored into the insurance premium. Individuals with previous offenses or moving claims can expect to pay higher rates, as can those with more expensive vehicles.
What can drivers do to save?
Some items that go into car insurance rates are easier to control than others. Age and credit ratings cannot be raised quickly in an attempt to get better rates. Drivers cannot easily move to a city or state where prices are lower. However, drivers can easily comparison shop through insurers’ websites. While convenient, this approach may not be ideal as there is limited guidance from an insurance professional. Independent insurance agents can provide quotes for many carriers at once and comparison shop on behalf of the customer. Therefore, one phone call can lead to many options at many reputable insurance carriers.
Some insurance programs, such as Allstate’s ALL Milewise and Progressive’s PGR Snapshot, monitor driver activity and offer better rates for safer drivers. Insurers provide a small device that the customer plugs into their car’s diagnostic port. The device then monitors how often the vehicle is used, when the vehicle is used, and sudden braking or rapid acceleration. Drivers who drive fewer miles, drive during the day and off-peak hours, and accelerate and stop carefully may qualify for additional discounts.
Consumers may also consider raising their deductibles, the amount a person pays out of pocket before collecting it from the insurer after a claim. Although this can reduce the premium, it should be done with caution. Raising the deductible too much can leave drivers with high bills after an accident or loss.
Insurers also offer a number of discounts. To earn a multi-policy discount, consumers may consider bundling their auto insurance coverage with their homeowners policy. Students may receive a discount for good grades or for pursuing an advanced degree. Active and retired military service members often qualify for lower rates. Certain administrative actions, such as paying the full policy premium or filing paperless statements, can also reduce premiums.
Rising prices have permeated the economy and car insurance rates are no exception. While much of these price increases are out of the consumer’s control, there are still these savings opportunities. However, it is never advisable to maintain adequate coverage or shop around on price alone. Talk to a trusted and licensed agent to discover other ways to manage rising costs.
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