High-Cost Factors
Vehicle insurance rates are quite high currently. Below are the factors that combine to contribute to the very high cost of vehicle insurance:Technological Advancement
Modern vehicles continue to advance in terms of technology. With cameras, sensors, and other features, including increasing safety improvements, the repairs are more expensive—both in terms of labor and parts.Inflation
Inflation has increased the cost of most goods and services. Prices for parts, along with wage increases, mean higher repair costs and thus higher insurance premiums.Medical, Litigation Costs
While it isn’t clear why both the number and severity of claims have been increasing, the related medical costs and litigation are yet another important factor.Crime Rates
Many urban locations are experiencing increasing crime, including vehicle theft.Extreme Weather
Many other locations are experiencing severe weather-related events that are damaging vehicles. Cars near the coasts have been destroyed by powerful hurricanes. Vehicles in other locations where wildfires are an ongoing problem are resulting in both vehicle and home insurance premiums rising.Age
Baby boomers are getting older, and that (age) alone is a factor, along with credit scores and even marital status.Auto Insurance Components
Let’s break down the components of auto insurance to see where we can consider cutting.Liability Insurance
Bodily injury liability covers medical expenses and lost wages for other people injured in an accident that you caused.Collision Coverage
Collision coverage covers damage to your vehicle resulting from a collision with another vehicle or object, regardless of who is at fault.Comprehensive Coverage
Comprehensive insurance protects against damage to your vehicle from noncollision events, such as theft, natural disasters, vandalism, and falling objects (for example, hail).Uninsured/Underinsured Motorist Coverage
If you’re involved in an accident with a driver who has either no insurance or insufficient insurance, you'll be covered if you purchased uninsured/underinsured motorist coverage.Gap Insurance
Gap insurance covers the difference between the actual cash value of your car and the balance you owe on your auto loan if your car is totaled.Rental Reimbursement
If you purchase rental reimbursement coverage, you'll be reimbursed for the cost of a rental car if your vehicle is being repaired due to an accident.Roadside Assistance
Towing, battery jump-starts, and flat tire changes are all covered under roadside assistance.Where to Make Changes
Now, the hard part: Where can we make changes so that we can get back to affording vehicle insurance?First is the most obvious: Shop around. There are various websites that will collect your personal relevant data, including your zip code, and recommend vehicle insurance companies. One such website is Compare.com. Insurify and The Zebra are two other good options. Check for any discounts such as multi-car, safe driver, or “good student.” Your credit score factors into the premium, too, so if it can be improved, that would be of some benefit to lower your insurance premiums.
If you have other types of insurance, such as home or renter’s, consider bundling them with your auto insurance to take advantage of any discount offered.
Raising your deductibles can lower your premiums, but make sure you can afford the higher out-of-pocket cost in case of a claim. With a 6-year-old vehicle, I decided to take the maximum deductible of $2,500, though I realize I could be buying a bigger problem down the road (pun intended) just to save more now.
Review your coverage levels to assess if there are areas where you can reduce coverage without compromising protection. I did this too, which means if I hit a Lamborghini or cause someone a lot of medical bills—and am at fault—I will also be in trouble.
Another clear and compelling careful habit is to drive safely and avoid traffic violations and collisions altogether! Sorry, I know this is obvious, but it is important.
Everything seems to be more expensive today. Two out of three Americans are living paycheck to paycheck. Even though inflation appears to have abated and returned to about 2 percent, the average price increase in the past two years is about 40 percent across the board. That, unfortunately, means we must consider how to earn more, perhaps we must save less, and we need to cut our spending. After cutting all the discretionary spending, those things we can do without, we find ourselves cutting and making changes wherever we can.
