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If you think the news of easing inflation means you won’t face any more price hikes, think again.
At least, that is, if you’re paying for car insurance. There is a very good chance that your premiums will increase significantly this year.
According to Bankrate’s Annual True Cost of Auto Insurance report released Monday, the average cost of full-coverage auto insurance nationally reached $2,014 a year, up nearly 14 percent from last year.
Why? This is a knock-on effect of high inflation over the past two years resulting in labor and parts shortages, which in turn have increased the cost of paying insurance claims on car repairs and related insured expenses.
“Car insurance rates are regressive,” said Kate Devanter, insurance analyst at Bankrate.
But the good news, he added, is this: “If inflation remains cool we may see insurers file for rate cuts in future years.”
Many other factors can increase your individual premium.
For example, having your teenage child as a driver on your policy will increase the rate.
Likewise if you’ve been in an accident, had speeding tickets or been convicted of a DUI.
Expect to pay more if your credit score drops or you let your auto coverage lapse temporarily.
Another big factor in the cost of your premium is where you live.
“Each geographic area has different risks and costs of living, [so] The cost of car insurance varies across the country,” Deventer said.
Among major metro areas, Bankrate found that average 2023 premiums rose the most in Orlando, Florida (up nearly 23% to $3,078), followed by Phoenix (up nearly 17% to $2,164). They fell the most in Philadelphia (down nearly 22% to $1,872) and New York City (down 14% to $2,649).
Meanwhile, as a percentage of median household income, drivers living in Miami now pay the most — 5.51%, or $3,447. Drivers in Boston, meanwhile, pay the least — just 1.32% of median earnings, or $1,328.
While you can’t control the effects of inflation or location on your premiums, there are other things you can do to keep your costs to a minimum, Deventer said.
Find discounts: Every auto insurance provides them and there are many types.
For example, you can get a discount if you take a defensive driving course.
Or if the young person on your policy goes away to boarding school or college and can’t drive your car, your insurer may offer a “student away” discount. And if they don’t drop out, but attend school full-time and get good grades by age 24, it can also save you some money, Deventer said.
In any case, if your insurer does not provide you with a complete list of options, ask to see what is available to you.
Shop around: If you’re unhappy with your premium, see if another insurer will give you a better deal, especially if you have a great driving record. “Each company uses a different algorithm to determine rates,” Deventer said.
(The full Bankrate study can be found here.)
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