The Impact of Rising Car Insurance Premiums

We are now in the third consecutive year of car insurance premium rates racing ahead at a rapid pace. Government stats show that the annual premium cost is nearly 50% higher than it was in June 2021. A recent Bankrate survey puts the average premium cost of insuring a car at more than $2,500.

The reality is that car insurance is now so expensive it has shifted from one of those costs you just swallow hard as a necessary household expense, to a big budget hit that deserves your strategic attention on how to (safely) minimize your costs.

Rethink ownership.

Do you really need to keep owning a car? Or for those of you in a multi-car household, I am asking you to seriously think through if you might be able to operate with one less car. Will that require some logistical changes in your family? Probably. But there’s also financial upside. What might you do with that extra $2,500 a year? Pay down some credit card debt? Contribute more to a Roth IRA? Build up your emergency savings?

Shop Around.

Most households don’t take the time to get premium quotes for coverage from other companies when renewal rolls around. Insurers love that. The lazy customer who just resigns themselves to re-upping is their ideal customer. Don’t be that person. If you own a home and have a “bundled” policy that includes your home and auto policies, staying put may make sense. But I still encourage you to hop online and get some quote comparisons. If you find you are paying a lot more for your auto insurance, check in with your current insurer and ask them to explain. Before you consider unbundling, check if removing your car insurance will impact your home insurance rate.

Increase Your Deductible.

A higher deductible will reduce your premium costs. This of course only makes sense if you have ample cash tucked in your emergency savings account to cover that deductible if the need arises.  

Consider Pay-Per-Mile Coverage.

Many insurers now offer policies where your premium has a base monthly rate, and then charges a per-mile fee as well. If you are a low-mileage driver, this can be worth considering (insurers have calculators to help you with the premium math). Or if you are a multi-car household, is there one car that is used for short hauls around town? Switching that one to a mileage-based policy could reduce your overall car insurance costs.

Price Out Insurance Before You Buy Your Next Car.

With car insurance costs now so much more expensive, it needs to be factored into any purchase costs. It’s not just that a more expensive car will typically have a higher premium cost than a less expensive car, but the repair costs for a given model, and its popularity among car thieves can also come into play.