Car Insurance Rates Rise For the 26th Straight Month—Here Are 5 Ways To Lower Your Cost

The cost of insuring your car is skyrocketing, even as the overall inflation rate is easing. Auto insurance rates climbed for the 26th consecutive month in February—spiking 20.6% from just a year earlier, according to the latest report from the Bureau of Labor Statistics.

In comparison, the overall annual inflation rate was 3.2% last month. Food prices were up 2.2%. Energy prices fell 1.9% year over year.

“Housing insurance, but also automobile insurance…that’s been a significant source of inflation over the last few years,” said Federal Reserve Chairman Jerome Powell at a March 7 Senate Banking Committee hearing.

The average U.S. driver now pays $2,150 a year for full-coverage car insurance, Forbes Advisor’s latest analysis found.

In fact, 11% of drivers report paying more for insurance than for their car loan payments each month and 7% shell out more for auto insurance than for utilities.

Why Are Car Insurance Rates Skyrocketing?

Experts pin the blame for rising auto insurance rates on a number of factors:

• Higher repair costs. Pandemic-related supply chain problems and overall inflation have pushed up prices for replacement parts to fix damaged cars. In addition, newer cars that have the latest technology require more sophisticated parts that come with bigger price tags.
• The roads are more crowded. The number of cars on the road has risen since the pandemic, resulting in more crashes. “There has been an increase in the frequency and severity of accidents, riskier driving behaviors like distracted driving, and injuries and fatalities on the road,” said Insurance Information Institute spokesman Mark Friedlander in a recent report.
• An increase in auto theft. Car theft rates rose sharply in 2023. In an analysis of data from 34 U.S. cities, the Council on Criminal Justice found that motor vehicle theft jumped 29% last year, and has more than doubled since 2019.
• More severe storms. An increase in catastrophic weather events has caused more cars to be damaged by flooding, hail, wind and fire.

And there’s another reason auto insurance prices are rising now, even as prices for other goods and services are stabilizing. There’s generally a lag between when insurers start to see the cost of claims go up and when they can increase rates to make up for it, says Stephen Crewdson, senior director of insurance intelligence for J.D. Power.

“In many states, insurers need to get permission to increase their premiums,” Crewdson explains, “and that can be a fairly long process.” After that, he adds, rate hikes can’t be implemented until drivers’ policies—which may run six or 12 months—are up.

5 Ways You Can Pay Less For Insurance

While you can’t prevent rates from moving higher, these five steps can help you snag the cheapest car insurance possible.

• Shop around. Compare car insurance quotes from several providers and see where you can get the best deal. It might make sense to switch your car insurance.

• Bundle policies. Insurers will often give you a discount if you bundle your auto and homeowners insurance with them.

• Increase your deductible. If you raise your deductible, you will likely have a lower premium. But remember that you’ll have to pay that higher amount out of pocket if you make a claim.

• Find out what discounts your insurer offers. Some insurers offer discounts for drivers who don’t put a lot of mileage on their cars, students who get good grades or motorists who pay their entire premium in advance.
• Track your driving. Usage-based car insurance uses technology to collect data about your driving habits, including speed, hard-braking and mileage. Based on its data calculations, the insurance company then assigns you a score; if you do well enough, you may pay less for your coverage.

One thing you should probably not consider, experts say, is dropping your coverage altogether. Driving without car insurance is illegal in most states, and if you’re involved in a serious accident, you could be liable for financially devastating costs.

“If you have a bad day…the insurance company can help make it better for you,” Crewdson says. But if you’re responsible for a severe collision, losses could “easily reach a million dollars or more nowadays.”

“Without insurance, your bad day just became a life-changing day,” Crewdson says.