Car Insurance Rates Are Rising Faster Than Inflation. Here’s What You Can Do About It

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Car insurance prices rose six times faster than inflation last year. Read on to find practical ways to bring your insurance costs back down. [[{“value”:”

You may have noticed something unpleasant in your latest car insurance renewal notice: Your insurance premiums have gone through the roof.

A slight increase is normal, but most Americans have sticker shock when their policies renew because car insurance premiums jumped 20.6% over the past year, according to Bureau of Labor Statistics data.

Your car insurance premiums can rise for many reasons, like if you got a few speeding tickets, but many Americans’ car insurance premiums are up through no fault of their own. Here’s why they’re increasing and what you can do to help bring them down.

Why car insurance premiums are on the rise

Consumers are well aware by now how expensive many of their everyday purchases have become, thanks to soaring inflation. But car insurance prices have risen six times faster than inflation over the past year.

The average car owner now pays $3,017 annually, or about $251 per month. Here are some of the key reasons why insurance rates have increased recently.

1. Vehicles are more expensive

One factor insurance companies use to decide how much to charge you is what type of car you drive and how expensive it is to replace after a major accident. The average new car transaction price is now $47,401, up from $37,851 four years ago.

2. Repair costs are up

There isn’t any one reason repair costs are higher, but parts and labor shortages during the pandemic made repairing vehicles more expensive. There’s also a shortage of mechanics.

The National Automobile Dealers Association says the number of automotive technicians graduating from training programs each year isn’t keeping up with demand.

3. Insurance companies are making up for losses

Insurance companies have sometimes suffered losses in other parts of their business, like home insurance. Significant losses from storms and other natural disasters have caused some insurance companies to either stop issuing policies in some states or increase their rates.

How to lower your car insurance premiums

I just received my annual car insurance renewal notice, and you can bet I’ll be looking at it much more closely this year. With car insurance rates so much higher than they used to be, I don’t feel comfortable paying it without first trying to find a better deal.

Americans probably won’t be able to return their car insurance premiums to where they were a few years ago. But you can control car insurance costs by making a few personal changes.

Here are a few suggestions for lowering your insurance premiums:

Choose the right car: If you’re buying a new car, contact your insurance company for a rate quote before purchasing it. More expensive cars, in general, will cost more to insure. Hybrids and electric vehicle insurance policies are usually pricier as well.Improve your credit score: A higher credit score often results in lower insurance premiums. One of the best ways to quickly improve your credit score is to pay down your debts so your debt-to-income ratio is lower.Look for discounts: Every insurance company offers discounts. Bundling your home and auto insurance is a popular way to get a lower rate on your insurance. You can also take a defensive driver course or contact your insurance company about its good driver discounts if you haven’t had any speeding tickets or accidents lately.Shop around: Sticking with the same insurance you’ve had for years is convenient. But if you do that too long, you may miss out on cheaper insurance options. Spending a little time comparing companies will help you know whether you already have the best deal.

There’s no end in sight for when car insurance rates will stop their rapid increases. Until they do, it’s probably a good idea to keep an eye out for any changes to the industry and occasionally revisit your policy to see if there’s anything you can do to lower your rates.

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