Inflation has caught up on auto insurance consumers, so the current coverage the average American has isn’t enough to cover rising costs in key areas such as medical costs and vehicle repairs.
Financial analysts call the syndrome “vehicle inflation,” which identifies the combined (and incremental) costs of out-of-market vehicle ownership, including auto insurance, auto repair, maintenance costs, and medical fees after being involved in a car accident.
One area that can make a difference for vehicle owners is car insurance.
“High medical bills and car repair costs mean that your insurance coverage may not be enough to properly protect your money in an inflationary environment,” said Kate Deventer, analyst at Bankrate.com. “While premium increases continue due to inflation and accidents, it may be worth considering increasing auto insurance coverage limits.”
The trick, Deventer said, is to be financially protected by reducing your risk of out-of-pocket expenses in an accident.
“While the goal is not to overinsure yourself and unnecessarily inflate your premiums, the right coverage is critical and can give you the peace of mind you need every time you’re behind the wheel,” she said.
Easier said than done
Getting the required car insurance in an inflationary environment but keeping insurance costs low is not a bridge cruise.
This is particularly the case with the high cost of vehicle combinations included in a typical auto insurance policy.
This is from Deventer.
Medical costs have increased: Consumer Price Index data shows that Medicare costs rose 5.1% between July 2021 and July 2022.
“Because medical expenses cost more, your coverage limits won’t go very far,” Deventer noted. “Because different types of auto insurance coverage pay for medical bills in the event of an accident, you may be at risk of not being insured.”
Vehicle costs have increasedInflation has also caused the cost of new cars to rise by 10.4 percent and to increase the costs of used cars by 6.6 percent since July 2021.
“Cars are getting more expensive, which means higher repair and replacement costs,” she added. “Due to the higher cost of vehicles and parts, your policy coverage limits may be insufficient, especially if you have lower liability limits.”
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Finding the perfect place for car insurance
The good news? Getting coverage for the car you need right now probably isn’t as expensive as you think.
“Car insurance is an integral part of your overall financial health, and your amount of coverage could mean the difference between financial discomfort and financial ruin,” Deventer said. However, the increase in premiums for the higher limits may not be very significant. For example, moving from state minimum liability limits to 50/100/50 coverage represents a 5% increase, or $7 per month.”
One way to get the most out of your car insurance money is to direct the money to where you’ll get the most benefit.
Ted Olsen, President of Human Rights Capital Development at Goosehead Insurance, the consumer insurance service platform.
The area where consumers are best to review with their insurance agent is the liability and medical restrictions on the policy.
“Fortunately, these coverages are the least expensive to increase and provide the most protection against rising treatment and repair costs for accidents where the consumer is liable for damages,” Olsen said. “Purchasing two to three times the liability coverage often only increases the overall premium by as little as 5-10%.”
Auto insurance consumers can also look for ways to offset the increased cost of required additional coverage simply by making smart insurance decisions.
“In the past, for example, it was very affordable to carry very low discounts on our cars,” Olsen said. “Choosing a higher collision deductible and comprehensive coverage will lower the policy price a bit while still maintaining the coverage you need.
Most auto insurance companies also offer usage-based insurance programs that meet premiums for the actual risks of the driving activity.
“If you let them track your hard braking or cell phone use while driving, for example, you might be able to save a significant amount of money on your insurance premiums just because you adhere to safe driving practices,” Olsen noted.
Olsen’s most reasonable advice? Talk to your insurance agent and review your policy annually.
“Staying in one place for decades is not the best way to keep your premiums low,” he said. “The market is very dynamic and has many factors that make us assume that there is no better option available elsewhere.”
“Have an independent agent do the shopping for you and offer various options to make sure you increase your protection and reduce the burden of premiums,” he added.
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