Auto Insurance Rates Rising
Due to an improving economy, job growth and record low gas prices, Americans are driving more. In fact, 2015 was the most heavily traveled year in history, with drivers logging more than three trillion miles, a 3.5% increase over 2014, according to the U.S. Department of Transportation.
The inevitable consequence of more miles being driven? More accidents, says Jeanne Salvatore, senior vice president and consumer spokesperson at the Insurance Information Institute.
When the number (and severity) of accidents rise, claims costs increase, says Salvatore. “Everything is costing more – from the size of claim settlements to litigation costs, medical costs to auto repair, which has gotten more expensive because people are buying more new, more expensive cars.”
Insurance companies are passing these costs onto you, the consumer, in the form of higher auto insurance premiums, says Joan Schmit, distinguished chair of risk management and insurance at the University of Wisconsin-Madison.
The federal government’s Consumer Price Index (CPI) for auto insurance – a proxy for policy rate activity – shows that prices have risen every single month this year.
Haven’t been hit with a rate hike yet? Buckle up, because it’s probably coming, says Schmit. “Insurers can only change rates every six months or so and they also must have rate increases approved by state regulators, so it can take a while.”
The hike could be significant so before your next renewal, consider these money savings strategies:
Shop Around
In an industry that’s as competitive as this one, rates vary “dramatically” from one insurance company to the next, says Salvatore, and you could save as much as several hundred dollars a year by switching.
As an FYI: just make sure you know the amount and type of coverage you need before you begin comparison shopping so that you’re comparing apples to apples.
Aggregators like www.insweb.com, www.netquote.com and www.insurance.com are useful tools.
Look Beyond Price
Don’t shop on price alone. After all, companies differ in what they cover, payouts and their level of service. “Find a company with a good reputation that’s financially solvent so that you have assurance they’ll be able to pay your claim or otherwise be there for you when you need them,” says Schmit. She recommends researching a company’s financial standing on reputable websites such as J.D. Power and A.M. Best.
Ask About Discounts
Do you have a good driving record? Have you taken a defensive-driving course? Do you pay your auto insurance bill in full? Does your car feature anti-theft devices? Have you been with the same insurer for a number of years? Do you “bundle” two or more types of insurance with the same company? You may qualify for discounts. Just ask.
Drop Coverage on Older Cars
As a general rule of thumb, it doesn’t make sense to buy comprehension and collision coverage, which covers repairs, if your car is worth less than $1,000, says Salvatore. That’s because your car has depreciated to the point that it is not worth repairing! Salvatore suggests you research your car’s value online, using resources such as Kelley, National Association of Auto Dealers (NADA) and TrueCar.
Maintain Good Credit Standing
When it comes to determining your rate, insurance companies look at everything from your location to the type of car you drive, your driving history, age and other factors – even your credit, says credit expert John Ulzheimer. “Credit is not a primary factor considered by insurance companies, but it is part of the risk evaluation. The way you manage your credit is predictive of the kind of insurance customer you’re going to be.”
Protect your good credit – and save on your premium - by paying your bills on time (Your payment history accounts for a whopping 35% of your credit score.) and keeping credit card balances as low as possible, using less than 30% of your available credit.
Vera Gibbons is a financial journalist and senior consumer analyst with www.gasbuddy.com. A former analyst with MSNBC who appeared regularly on the “Today Show,” Gibbons was previously a Financial Contributor with CBS News. Prior to CBS, she worked as a Correspondent for CNBC’s “High Net Worth”. Gibbons has written for Inc., SmartMoney , Kiplinger’s, Real Simple, The New York Times, Fortune.com and CNBC.com. Today, she writes for CNN Money, FoxBusiness.com, and Bankrate.com.