Managing Auto Insurance: Strategies To Combat Skyrocketing Premiums

Auto insurance costs have been skyrocketing across the US, with some states, such as Minnesota, experiencing a projected increase of over 60% in 2024. The national average cost of full coverage car insurance is now the highest it’s ever been at $2,543 a year, according to a recent Bankrate study. There are several reasons for this increase, including inflation, rising repair costs, climate change, and an increase in traffic fatalities. So what can consumers do to mitigate these rising costs?

Shop around for different insurance carriers

If your auto insurance premium has skyrocketed, one of the best things you can do is shop around for different insurance carriers. This is because insurance companies are reacting to a variety of factors, including inflation, the cost of vehicle parts and repairs, and an increase in accidents and fatalities. As such, you may find that some insurance companies are offering better deals than others.

When looking for a new insurance carrier, it is important to compare prices and coverage options. Make sure you understand what is included in the policy and what is not. For example, you may be able to find a cheaper policy that does not include non-essential coverages like towing, lockout services, or rental cars. Alternatively, you could increase your deductible, which is the amount you pay out of pocket before your insurance coverage kicks in. This will lower your monthly premium.

It is also worth looking into discounts offered by different insurance carriers. For example, many companies offer defensive driving discounts if you have taken a defensive driving course. You may also be able to get a discount for being a homeowner, going paperless, or bundling your home and auto policies.

When shopping around for a new insurance carrier, it is important to read the fine print and understand exactly what is covered by the policy. Make sure to ask about any exclusions or limitations, as well as the process for filing a claim. It is also a good idea to check the financial stability of the insurance company to ensure that they will be able to pay out claims in the future.

By shopping around and comparing prices, coverage options, and discounts, you may be able to find a more affordable auto insurance policy that better meets your needs.

Remove non-essential coverages

If you're facing a sharp increase in auto insurance costs, one way to reduce your premium is to remove non-essential coverages. While it's important to maintain the legally required auto insurance coverages, you can save money by removing optional add-ons that you may not need. Here are some tips to help you remove non-essential coverages:

• Understand your basic coverage: Before making any changes to your policy, it's crucial to understand what is included in the basic or standard car insurance coverage in your region. This typically includes liability coverage, which protects you against lawsuits for injuries to others and damage to their property, as well as coverage for your own injuries, regardless of who caused the accident.
• Identify optional coverages: Once you know what is included in your basic coverage, identify the optional coverages that you can potentially remove. These may include roadside assistance, custom parts and equipment coverage, rental car insurance, family protection coverage, and transportation replacement coverage, among others.
• Assess your needs: Evaluate your specific situation to determine which coverages you may not need. For example, if you plan to stay at home and not rent or drive a car during a certain period, you may consider removing rental car insurance and transportation replacement coverage.
• Consider your driving habits: If you are a safe driver with no history of collisions and you're confident in your driving skills, you might want to remove collision coverage, which covers damage to your car in the event of a collision with another object or vehicle.
• Evaluate your vehicle's value: If your car has low cash value and you're willing to pay for a replacement in the event of a total loss, you may be better off skipping comprehensive coverage, which protects your car from risks like theft, fire, vandalism, and natural calamities.
• Contact your insurance provider: After deciding which coverages you want to remove, contact your insurance provider to request the removal of these coverages. Be sure to carefully review your policy and understand the implications of removing certain coverages.

Remember, while removing non-essential coverages can help reduce your premium, it's important to strike a balance between cost savings and ensuring you have adequate protection. Additionally, keep in mind that some coverages may be required if you have a car loan or lease.

Reduce coverage limits and increase deductibles

If you're facing a steep increase in your auto insurance costs, one option to consider is reducing your coverage limits and increasing your deductibles. This approach can help lower your insurance premium, but it's important to understand the implications and choose an option that suits your needs and financial situation.

First, let's understand what a deductible is. A car insurance deductible is the amount you are responsible for paying towards an accident or a claim. For example, if you have a $1000 deductible and $2000 in covered damages, you will pay the first $1000, and your insurance company will cover the remaining $1000. The deductible applies to each accident and is usually associated with comprehensive and collision coverage. Comprehensive coverage helps pay for damages not caused by a collision, such as fire, theft, or weather, while collision coverage assists in repairing damage to your vehicle resulting from a collision with another car or object.

Now, when you increase your deductible, you are essentially agreeing to pay more out of pocket if an accident occurs. This shift in responsibility from the insurance company to yourself results in a lower insurance premium. For instance, increasing your auto insurance deductible from $200 to $500 can lead to notable savings on your premium. Opting for a $1000 deductible may provide even more significant savings. However, it's crucial to ensure that the deductible is an amount you can afford to pay in the event of a loss.

On the other hand, reducing your coverage limits means decreasing the maximum amount your insurance company will pay out for a covered loss. For example, if you have liability coverage with a limit of $100,000 and cause an accident, your insurance company will pay up to that amount to the other party. If you reduce this limit, your premium will likely decrease, but you will be responsible for any amount over that limit if an accident occurs.

When considering these options, it's important to weigh the risks and benefits. While increasing your deductible and reducing coverage limits can lower your premium, it also means you'll have to pay more out of pocket if an accident occurs. Ensure that you understand the financial implications and choose options that align with your comfort level and ability to take on additional risk. Discuss these options with your insurance agent to gain a comprehensive understanding of the potential savings and risks involved.

Avoid adding teen drivers to your policy

Adding a teen driver to your insurance policy can be extremely expensive. In fact, it is considered the most expensive life event for auto insurance consumers. According to a Bankrate study, adding a teen driver to a policy can cost around $2,800 per year, per teen driver. This is because, statistically, drivers in their late teens are highly accident-prone.

If you are looking to avoid the high costs of adding a teen driver to your policy, here are some things to consider:

• In most states, you won't have to add a teen to your policy if they only have a learner's permit, as they are required to have a licensed driver with them at all times. However, this varies by state and insurance company, so be sure to check with your provider.
• If your teen has good grades, you may be eligible for a "good student" discount. This can save you anywhere from 5% to 25% on your premium.
• Enrolling your teen in a defensive driving course or driver's education program can also help reduce costs. These courses can save you up to 15% on your annual premium.
• If your teen is going away to college, you may be able to get a "student-away" discount. If they don't have a car at college and only drive yours occasionally, this can significantly reduce your costs.
• Consider the type of car your teen is driving. Sports cars and high-performance vehicles will add to the cost of insurance. Instead, opt for a family sedan, minivan, or small SUV, which typically have better rates for teens.
• If your teen is driving an older car that has depreciated in value, you may want to consider dropping comprehensive and collision coverage. This will reduce your premium, but it also means you'll have to pay for any repairs out of pocket if your teen is in an accident.
• Shop around for insurance. Compare quotes from multiple companies and ask about available discounts.

Remember, it is important to have your teen insured, even if it increases your premium. Uninsured teen drivers can lead to denied claims, voided policies, or increased premiums down the line.

Avoid adding a new vehicle or driver to your policy

Adding a new driver to your car insurance is a simple process, but it can have financial implications. If you are looking to avoid a sharp increase in your auto insurance, it is worth considering the following advice.

Firstly, it is important to understand when and how to list a driver on your policy. Generally, you should include licensed drivers who live in your household and have access to your vehicle on your car insurance policy. This could include a partner who moves in, teenage children who obtain their driver's license, or college-aged children who drive your vehicle when they return home. It is also worth checking with your insurance company whether they would like you to include other people who live with you, such as roommates or boarders, on your insurance. It is generally recommended to add anyone from your household who borrows your car to your policy. This ensures that you have coverage for any accidents they may be involved in.

If someone who works for you but lives outside your home starts using your car regularly, ask your insurer whether you should list them on your policy. In most cases, adding this person will protect your financial interests, and they can be removed if their employment ends. However, occasional workers, such as babysitters, do not need to be added. Other people who should be added to your policy include health care workers and friends or family members who live outside your home but borrow your car regularly.

It is also worth noting that adding a driver with a poor driving history or an inexperienced driver to your policy can increase your premiums. This is because they are considered high-risk motorists. On the other hand, adding an experienced driver with a clean driving record can result in lower premiums, as they are low risk to the insurer.

If you are thinking of adding a new vehicle to your policy, it is worth noting that this may increase your insurance costs. However, it is often more cost-effective to have multiple vehicles on the same policy, as many leading auto insurance providers offer multi-vehicle discounts. This can result in savings of 10 to 25 percent on your liability, comprehensive, and collision coverages for each vehicle.

In summary, while it is important to ensure all drivers who should be listed on your policy are added, it is also worth considering the potential financial implications of doing so. Adding drivers with poor driving histories or inexperienced drivers may increase your premiums, while adding experienced drivers may result in cost savings. Similarly, adding multiple vehicles to your policy can increase costs but may also make you eligible for multi-vehicle discounts.

Frequently asked questions