If you’re about to renew your car insurance and are shocked by how much your rates have increased, you’re not alone. Premiums rose by 22% between April 2023 and April of this year, according to Bureau of Labor Statistics data released in June. That’s on top of double-digit increases the previous year.
Although your auto insurance rate may not increase as dramatically at renewal time, odds are it will go up – at least a little. And if you live in a state where average premiums are already high, even a slight increase in rates can be a financial burden.
There are a number of reasons why the cost of auto insurance is rising: inflation, cars that are more complex to build and repair, even severe weather. Where you live can also play a role in how much you pay. But there are steps you can take (that don’t require moving out of state) to save money on car insurance, even as costs rise.General inflation, sophisticated vehicles with pricey replacement parts and even severe weather have all contributed to rising car insurance costs.Where you live has an influence on how much you pay for auto insurance coverage.Although you can protest a rate increase, your insurer is unlikely to lower your premium. In that event, shopping for a new policy may be in order.
Car insurance costs have been rising at their fastest rate since the 1970s, according to The New York Times. Several factors are at play.
The prices of both cars and the parts used to repair them have jumped in recent years as inflation has taken hold in all parts of the economy.
“There are countless factors driving up the cost of car insurance, but first and foremost is inflation, which is increasing the cost of labor and parts,” says Alaina Hixson, Nashville-based director of sales and operations at The Churchill Agency, an insurance agency.
As cars get smarter, they are increasingly reliant on computer systems that are very expensive to repair and replace, Hixson says. “Insurance companies have to price that in when they consider their risk in underwriting a policy,” she says.
A surge in “lawsuit abuse” also is driving prices higher, says Christine O’Brien, president of the Insurance Council of New Jersey.
“Unfortunately, claims litigation has risen exponentially, with ‘nuclear’ verdicts setting new precedents, which have increased future judgements and fueled a self-fulfilling cycle of increased costs,” she says.
Severe weather events are further adding to insurance costs, both O’Brien and Hixson say.
“What most people probably don’t realize is the impact weather is having on auto insurance costs,” Hixson says. “There is a tendency to associate weather events with home insurance, but they also have a significant impact on auto insurance rates, as cars are just as susceptible to damage from wind, water, hail.”
In response, insurers are either reducing their risk by pulling out of certain state markets or raising their rates by double-digit percentages. In California, for example, state regulators approved more than $1 billion in car insurance rate increase requests from major insurers at the end of 2023. The average policyholder in the Golden State could see their rate increase by as much as $167, according to California-based advocacy organization Consumer Watchdog.
Many factors determine how much individual drivers pay for car insurance. The amount of coverage you purchase has a large impact on your costs.
For example, your state’s minimum requirement for car insurance is likely to include relatively modest amounts of liability coverage. This type of coverage will pay for expenses related to property damage and injuries you cause to another person, up to your policy limits.
A more robust liability policy with 50/100/50 coverage limits – $50,000 in bodily injury, per person; $100,000 bodily injury, per accident; and $50,000 in property damage protection – is more expensive, but also will better protect you financially.
By contrast, full coverage includes collision insurance, which covers losses to your own vehicle in the event of an accident, and comprehensive insurance, which covers damage to your auto caused by weather, natural disasters, and animal collisions, as well as theft and vandalism. As a result, this coverage costs more.
The rates below were collected from auto insurance comparison site CarInsurance.com and its data partner Quadrant Information Services for single, 40-year-old male and female drivers of a 2023 Honda Accord LX with a good insurance score and no violations on their record for the following: state minimum liability insurance, standard liability with coverage limits of 50/100/500, and full coverage with liability limits of 100/300/100 and a $500 comprehensive and collision deductible.
Note that full coverage rates are based on insurance coverage with 100/300/100 liability limits and $500 comprehensive and collision insurance deductibles for single, 40-year-old male and female drivers of a 2023 Honda Accord.
The most expensive states for car insurance have much higher rates than the nationwide average. There are several reasons why car insurance is more expensive in these states.
For example, Louisiana has high rates of uninsured and underinsured drivers, which can leave insurers with higher costs to cover when those motorists cause accidents. Insurance companies protect themselves from this risk by charging higher premiums.
Meanwhile, Michigan is a no-fault state when it comes to car insurance and requires all drivers to carry a high amount of personal injury protection (PIP) coverage, which requires drivers to file injury claims with their own insurer in the event of an accident, regardless of fault. That fact also drives costs higher.
In some states, drivers pay a lot less than the national average for car insurance.
Maine leads the way, with premiums that are sharply lower than the nationwide average. Maine has a low population density, which helps reduce the number of accidents in the state. Few accidents means fewer claims and lower insurance rates.
Maine also has one of the lowest rates of uninsured drivers in the country, which helps keep insurance costs lower. That is also true of New Hampshire and Idaho, two other states with relatively low average car insurance rates.
Each insurance company uses its own proprietary algorithm to determine rates, taking into account numerous variables.Age: The very youngest drivers tend to pay the highest costs because they are less experienced and get into more accidents on average than older motorists do.Gender: On average, women get into fewer accidents than men, and the accidents they do get into are less serious on average. They also have fewer DUIs. That means women pay lower rates on average.Driving record: Drivers with a clean record pay the least on average; a single speeding ticket or accident can raise your rate by hundreds of dollars per year.Credit history: In many — although not all — states, insurers can use a driver’s credit-based insurance score when setting rates. This includes your history of paying bills on time and how much debt you carry.Where you live: Those who live in urban areas tend to pay more, because there are more accidents and incidents of theft and vandalism in the city.How many miles you drive: Those who drive only occasionally have a lower risk of accidents, and thus often pay lower rates.Coverage limits: If you purchase full coverage, you will be better protected, but you will also pay more for that additional coverage.Deductibles: Policyholders who accept higher deductibles pay less in premium costs.Number of drivers: The more drivers you have on the policy, the more you will pay. Adding a teen driver to your policy is particularly likely to make your rates soar.Type(s) of vehicles: Factors such as how often your vehicle’s make and model is stolen and the cost to repair that type of vehicle play a role in your premium costs.Number of vehicles. Insuring two or more cars is more expensive than covering just one.Other factors: Whether or not you qualify for discounts has a big impact on how much you pay. For example, bundling various types of coverages with the same insurer can get you a discount. Teen drivers who earn good grades also might qualify for a price break.Inflation: In this era of rising prices, car insurance costs are going up too.Claims in your area: If you live in an area with a history of a lot of claims, you will likely pay more for your coverage.State regulations: States rules can impact your costs. As we noted, no-fault insurance laws often create an added cost for many policyholders.
Related: Factors affecting car insurance premiums
If your car insurance rate is too high, there are several steps you can take to lower it. They include:Shop around for a new policy. Getting car insurance quotes from several companies can help you find the best possible rate. Each insurer has its own criteria for setting rates, and your own insurance profile is likely to be a better fit for one insurer than for others.Bundle your policies: By purchasing multiple insurance policies — such as auto insurance and homeowners insurance — with the same company, you can often get a discount on your premiums.Raise your deductible: As you raise your deductible, your insurance premiums should fall. However, if you choose this route, make sure you can afford to pay your deductible should you need to file a claim.Ask about low-mileage discounts. Some insurance companies cut a break to policyholders who drive less frequently. If you do not commute to work or have retired and typically do not log many miles in your car annually, you might qualify for this price break.Inquire about other discounts. Many insurance companies offer a host of discounts. For example, you might save if you take a defensive-driving course, or if your teen driver earns good grades. Ask about discounts and see if you qualify.Reduce your coverage. If you have an older car, dropping your comprehensive and collision coverage can be a good way to cut the cost of insurance. Just be aware that without this type of insurance, you will have to pay for any damages to your car out of pocket.Take a defensive driving course. By demonstrating that you’re keeping your driving skills sharp, you can qualify for a discount with many insurers.
If your insurer suddenly slaps you with a rate hike, it is unlikely that there will be much room for negotiation.
“Anyone is welcome to appeal their rates, but it’s important to understand there isn’t much wiggle room in that department,” Hixson says.
It might help to make sure your record is being accurately represented to your insurer. “There can sometimes be computer glitches that cause a ticket on your record to show up multiple times,” Hixson says.
If none of that works, it might be time to look for a new policy.
“Consumers should shop around for the best coverage they can afford,” O’Brien says.
Typically, you can expect your car insurance rates to increase at renewal if they are going to increase.
“Insurance policies are renewed every six months. That doesn’t mean rates will increase every six months.” says Loretta Worters, vice president of media relations for the Insurance Information Institute (Triple-I), an insurance industry trade and education association.
Many factors impact whether your rates increase, including:Your claims historyYour ageYour driving behaviorThe make and model of your car
Some drivers might see their rates decrease. For example, new drivers who maintain a clean driving record can expect their rates to sharply decline over time, first at age 20 and again at age 25. Older drivers aged 55 to 65, enjoy the lowest car insurance rates on average.
However, the trend of rising rates throughout the industry means you should be prepared for the possibility of rising insurance costs.
When an insurer raises rates, it is usually due to some increase in risk. For example, if you have been in an accident or have gotten a speeding ticket, your rates might rise at renewal.
Making a claim on your collision and comprehensive coverage or adding a new driver to your policy also can result in increased costs.
Other reasons why your premium may increase include:Increasing your coverage amountsAdding new drivers to your policyHaving a lapse in insurance coverageMoving to a new neighborhood or city where risk factors are greaterInsurance Information Institute. “9 ways to lower your auto insurance costs.” Accessed August 2024Progressive. “Why did my car insurance rate go up?” Accessed August 2024Lewis Mohr Real Estate & Insurance Agency. “Why is Auto Insurance So Expensive in Louisiana? An Analysis of Louisiana’s Auto Insurance.” Accessed August 2024MarketWatch. “Average Cost of Car Insurance in Michigan.” Accessed August 2024F.A. Peabody Insurance. “Maine is the Cheapest State for Buying Car Insurance.” Accessed August 2024Insurance Information Institute. “Facts + Statistics: Uninsured motorists.” Accessed August 2024Insurance Information Institute. “What determines the price of an auto insurance policy?” Accessed August 2024New York Times. “Why Is Car Insurance So Expensive?” Accessed August 2024
Editors collected rate information from auto insurance comparison site CarInsurance.com and its data partner Quadrant Information Services for single, 40-year-old male and female drivers of a 2023 Honda Accord LX with a good insurance score and no violations on their record for the following: state minimum liability insurance, standard liability with coverage limits of 50/100/500, and full coverage with liability limits of 100/300/100 and a $500 comprehensive and collision deductible.
We analyzed more than 53 million quotes, more than 34,000 ZIP codes and 170 insurance companies nationwide.
Note: 100/300/100 means up to $100,000 for the medical bills of those you injure, up to $300,000 per accident for bodily injury liability for all persons injured in one accident, and $100,000 to repair other drivers’ cars and property that you damage.
