Car insurance rates have been steadily climbing, and while there are several culprits, one might surprise you: the rise of high-tech safety features, which are costly for mechanics to replace and companies to insure.
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Federal Consumer Price Index data shows that car insurance rates typically rise 3 to 4 percent annually, but in December 2016, car insurance rates were up 7 percent from the previous year. And in 2017, car insurance rates jumped up 7.9 percent. Of course, the cost of insurance is higher in certain states. For instance, according to the Insurance Information Institute, New Jersey has the most expensive insurance in the country with a $1,263.67 average annual cost, while Idaho has the cheapest, with a $571.94 average annual cost.
Why are car insurance premiums climbing? One reason is the advancement of car technology features, according to Ben Guttman, an executive broker with North Central Insurance Agency in Baltimore.
“Vehicles have become more advanced, both in terms of safety and technology. This means there are more expensive parts to fix even in a small accident, and the cars are designed to protect the passengers even at the cost of being totaled,” Guttman says.
JoAnne Murray, president of Allan Block Insurance Agency in New York City, agrees. Car parts are simply more expensive than ever, and that translates to more expensive insurance prices.
“A side-view mirror can cost $1,000. Bumpers are more than $2,000. The days of a minor fender bender where the cost to repair was under $1,000 doesn’t exist. This drives up the rates,” she says.
But there’s another reason you’re paying more, and it also has to do with technology. Your smartphone, your satellite radio, your GPS and other shiny buttons you’re pressing instead of looking at the road are also driving up car insurance rates.
“The main cause for rising costs is distracted driving,” Guttman says. “When you aren’t watching the road, it not only increases the likelihood of a wreck, but also increases the severity. What would have been a small fender bender if you had hit the brakes a second earlier, now is a total loss.”
Other factors can help increase premiums, too, says Ava Lynch, an Austin, Texas-based marketing coordinator with TheZebra.com, an auto insurance comparison website.
[Read: The Financial Considerations of Buying Your Teenager a Car.]
“When we look at why insurance premiums are rising, we need to look at events that happened in 2015 and early 2016, as this is the time frame insurance companies use to predict future losses and price future premiums,” she says. “So, things like change[s] in state legislation, floods, hurricanes, wildfires and increasing urban populations — which increases road damage and accidents — are all things you should consider as a direct cause of insurance premiums on the rise.”
So, what can you do to lower your car insurance? Fortunately, there are plenty of smart steps you can take, though there’s no one-size-fits-all strategy. And keep in mind, the goal should be to lower your premiums without sacrificing coverage. The point of car insurance isn’t to pay as little as possible, it’s to make sure that you are actually covered if something goes wrong.
In any case, here are some expert-endorsed strategies to trim costs.
1. Buy a cheaper car. If you don’t want expensive insurance, and you’re planning on buying a new car in the near future, consider going for a pre-owned car without the technological marvels like backup cameras and night-vision features. Another bonus is that your monthly payments and overall total cost of the car should be considerably less.
2. Bundle policies. Long-time drivers know this, but you may not if you’re new to paying for your own insurance. If you get your car insurance from the same company that offers you homeowners or renter’s insurance, you’ll save money. “[You can save] up to 25 percent on each policy with some companies,” Murray says.
3. Raise your deductible. It’s a surefire way to lower your payments, but it’s a risky strategy. “This is a tricky one, because you have to be able to afford the deductible in the event that you actually do have to file a claim,” says Alex Lauderdale, a Houston-based transportation analyst and the founder of EducatedDriver.org. “However, raising your deductible can [help you] save big. Going from a $200 deductible to a $1,000 deductible can save you around 40 percent on premiums.”
4. Tinker with your coverage. Take a comprehensive look at your policy and study what you’re covered for. Maybe you can call your agent and toss something out, Lauderdale says. “I’m not saying you want to lower personal injury or medical payments coverage. However, if you have more than one vehicle, you might be able to save by getting rid of rental coverage. And if you already are a member of something like AAA, then you could save by getting rid of [your insurer’s] roadside coverage,” he says.
5. Pay your bills on time. In many cases, the lower your credit score, the higher your car insurance is. “There’s a gigantic link between credit score and auto insurance premiums,” says Dan Green, founder of the personal finance education website Growella.com.
Green recently pulled 20,000 auto insurance quotes from online insurance quote engines, for a study done for his website, and says that he found that a driver with a 720 FICO score and a recent DUI actually pays less for auto insurance than a person with a 620 FICO score and no accidents and violations. In 2015, Consumer Reports magazine investigated 2 billion auto insurance price quotes and came away with a similar conclusion.
6. Avoid car accidents. This is obvious advice, and it’s more of a life-saving than a money-saving strategy, but remember an accident will make your premiums rise, so it’s a wise idea to stay vigilant on the road. If you’re in an accident, your insurance payments will almost certainly climb — no matter what, Murray says.
[See: 10 Unexpected Costs of Driving.]
“Any accident today will impact the rating tier,” Murray says, referring to the rate table that insurers use when deciding how much insurance, from rock-bottom to exorbitant prices, that individual consumers should pay based on each driver’s risk. “Gone are the days of a ‘not at fault’ accident not impacting your renewal rate. All incidents have some type of impact.”
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Is Your Auto Insurance Going Up? Here’s How to Lower Your Bill originally appeared on usnews.com
