Inflation peaked at 9.1% in June 2022, and it’s no surprise that the problem affects auto insurance rates in addition to other regular expenses we pay, such as groceries and fuel. Car insurance companies take into account labor and material costs when setting prices – both of which are heavily affected by inflation – and this has led to higher car insurance premiums. If this is the case for you, you may be wondering what you can do to get cheaper car insurance.
“Consumers certainly feel it’s impossible to hide inflation from it now, given that prices have jumped at the fastest rate in 40 years,” said Sarah Foster, Bankrate’s US economics correspondent. “High inflation makes personal finance best practices even more important. This includes shopping, budgeting, and tracking your spending.” Finding ways to cut spending can seem tricky, especially when it comes to auto insurance, but Bankrate may be able to help. Our insurance experts will guide you through the process so you can work on increasing your savings.
Do I need to purchase my car insurance policy?
Before you start collecting auto insurance quotes, you may want to think about whether you need to shop. Price increases are likely to be fairly prevalent, but that doesn’t mean every driver will see the same percentage increase or even higher insurance costs at all. If your company’s rates were relatively low before, you may still feel that your policy is within your budget even after the increase.
To decide if you should shop, take some time — 15 to 30 minutes should be enough — to assess your insurance. Consider answering questions, such as:
- Does your policy still fit your needs?
- Is your insurance premium still proportional to your overall financial budget?
- Do you still find interactions with your company effective and beneficial?
- Have your policy coverage needs changed?
If you still love your company and are comfortable with the car insurance premium and type of coverage, there may be no need to shop. Your situation is unique to you; Only you can weigh the pros and cons of staying with your current company versus shopping and switching carriers.
When is a good time to shop for auto insurance?
There are no official guidelines about when to shop in your auto policy. Although it may be convenient to shop for the renewal date, there is no need to wait until then. You can shop and change carriers at any time during the term of your policy. Some situations can be shopped, and understanding these situations sooner rather than later can help you decide if you need to shop before the price hike affects your budget.
Car insurance rates began to increase in early 2022 due to inflation, supply chain disruptions, increased severity of claims and labor shortages, and these increases are not yet subsiding. As inflation continues to rise, auto insurance rates will likely continue to rise. You may receive your policy renewal only to find that your new premium no longer fits your budget. Your policy may not have been renewed yet, but you noticed a rate increase sooner due to a change you made to the policy, such as adding a driver or vehicle. Or you may not experience any price increases, and you are simply curious if you can find cheaper auto insurance coverage.
Given the high prices, this could be a great time to shop for affordable coverage. Just be sure to choose the same coverage limits you currently have when doing a price comparison, or as close as possible, so you get a real price comparison. If you choose lower limits than you have now, you will likely get a cheaper quote, but you won’t really know which company is offering the lowest price for the coverage you want.
Move to a new area
If you move to a new state, you will have to get a new insurance policy. Car insurance policies do not travel across state lines if you make a permanent move because each state has its own insurance laws. You will likely be asked to update your vehicle registration and insurance policy to your new status within 30 to 60 days. Insurance laws (particularly surrounding the types and levels of coverage necessary), claims risk, and cost of living vary by state and can affect auto insurance rates.
If you move to a new city or just a new zip code within your state, you will likely encounter a price change. Each geographic region comes with its own unique set of ranking factors. Insurance companies interpret these rating factors differently, resulting in prices varying by carrier. This means that any movement, even just across town, could mean it’s a good time to shop.
If you have a teen driver in your home, you may want to be prepared to shop for your policy when they get their license. Bankrate’s study of average premiums found that adding a 16-year-old driver can increase auto insurance premiums by an estimated $2,168 per year. Young people are one of the most expensive age groups to insure, but you can find cheap car insurance for teen drivers with a little time and research. Make sure you get a quote for the teen on your current policy first, though, before you start shopping. This way, you will have a benchmark to use in comparing prices. You may find that your current company is the cheapest.
Buy a different vehicle
The make and model of your vehicle is one of the biggest factors when it comes to how much you pay. The average cost of insuring an economy car like Toyota Prius is $1,924 per year for full coverage, while a BMW 330i sports car is $2,270 per year. The price and availability of parts and labor, the statistical probability of accidents, the safety characteristics of your vehicle and the overall value of your vehicle can all affect insurance premiums. If you get a different type of vehicle and your current insurance company increases your premium beyond the comfortable range, you can shop to see if another carrier offers a lower rate.
How often should I shop for auto insurance?
In general, it’s a good idea to shop for auto insurance when a life event occurs — like the ones listed above — or when your premium is too expensive for your budget. Shopping more often can help you determine if your rates are still competitive, but most insurance professionals advise against changing companies too often. Doing so can prevent you from earning valuable loyalty discounts.
Additionally, although relatively rare, some carriers charge a cancellation fee if you cancel your policy prior to renewal. Some companies also have a “earned premium,” which means that no matter how quickly you cancel, you lose a certain amount of the company’s premium. Changing companies too often could expose you to cancellation fees and earned premiums, which could ultimately cost you more than you save.
How to shop for car insurance
If the only thing stopping you from shopping for auto insurance coverage is your concern about the amount of time it takes, it doesn’t have to be daunting. You may have heard in the past that you need to research your state’s minimum requirements before shopping to avoid buying less than you need to legally drive in your state. You can save time and avoid searching because this is not true. Insurance companies cannot legally offer you a policy that falls short of your state’s requirements. For this reason, you don’t need to know your state’s insurance requirements or look for anything beyond basic car insurance knowledge. You can do it, and it’s easier than you think! Here are some suggestions to help you get started.
Learn how to get quotes
Many insurance companies offer an online quote tool, although you can also get a quote over the phone or visit a local agency, if available, if you’d like more guidance. One of the biggest things to watch out for, especially if you quote yourself online, is your coverage limits. Be sure to get as close as possible to current coverage types and limits to get an accurate comparison. According to Steve Ellis, assistant vice president and field manager for claims, shoppers should “be wary of insurance premiums that are too low. If a quote is too low, ask clarifying questions to make sure you’re comparing apples.” Also, keep in mind that online quote tools may have limited functionality compared to insurance agent tools. Some types of coverage and discounts may not be available for you to bid for yourself.
Double-check that your coverage meets your needs
According to Ellis, “There are a few things shoppers need to keep in mind during the bidding process. The most important thing is to make sure your driving needs match the coverage offered.” This could mean adding ride-sharing coverage, emergency roadside assistance, or other approvals, for example, if you need it. Ellis also points out that properly securing your vehicle for any modifications, such as lift kits or custom audio equipment, can help ensure that you are properly protected from damage.
Consider working with an independent insurance agency
It may be a good idea to work with an independent insurance agency if you are particularly nervous about shopping. These agencies contract with many auto insurance companies and market your policy on your behalf. Licensed agents will also be able to listen to your scenario and help you craft a policy that fits your needs, including your budget.
While you may not avoid inflation that can drive up your car insurance rates, you can control your rates another way. Each auto insurance company uses its own rating system to calculate premiums, so the same coverage will likely cost different amounts with different companies. You can use this to your advantage by comparing shopping and choosing the best option for your budget.
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