Inflation may fall, but not the cost of your car insurance

Jeanne Sahadi, CNN

If you think news that inflation is coming down means you won’t face higher prices again, think again.

At least if you pay for car insurance. There’s a very good chance your premiums will go up this year… by a lot.

According to Bankrate’s annual report on the true cost of auto insurance released Monday, the average cost of full coverage auto insurance hit $2014 a year nationwide, up nearly 14% from last year.

Why? This is a lagging effect of the high inflation over the past two years, caused by a shortage of labor and parts, which in turn has led to an increase in the cost of car repair insurance claims and related insurance costs.

“Auto insurance rates are reactionary,” said Kate Deventer, insurance analyst at Bankrate.

But the good news, she added, is this: “If inflation continues to fall, we may see insurers bid for rate cuts in subsequent years.”

In addition to inflation, other factors will also affect your account.

Many other factors can increase your individual premium.

For example, placing your teenage child as a driver on your policy will up the ante.

The same is true if you’ve been in an accident, received speeding tickets, or been convicted of drunk driving.

Be prepared to pay more if your credit score deteriorates or if you temporarily interrupt automatic coverage.

Place, place, place

Another important factor in how much your insurance premiums will cost is where you live.

“Each geographic area has different risks and cost of living, [so] The cost of auto insurance varies by country,” Deventer said.

Among large metropolitan areas, Bankrate found that average premiums rose the most in 2023 in Orlando, Florida (nearly 23% to $3,078), followed by Phoenix (up almost 17% to $2,164). They fell the most in Philadelphia (down nearly 22% to $1,872) and New York (down 14% to $2,649).

Meanwhile, as a percentage of median household income, Miami-based drivers now pay the most at 5.51%, or $3,447. Meanwhile, drivers in Boston pay the least at just 1.32% of median income, or $1,328.

How to reduce your car insurance premium

While you can’t control the impact of inflation or location on your premium, Deventer says, there are other things you can do to keep your costs to a minimum.

Look for discounts: Every auto insurer provides them, and there are many types.

For example, you can get a discount if you complete a safe driving course.

Or, if the teen on your policy is leaving for boarding school or college and can’t drive your car, your insurance company may offer a “student travel” discount. And if they don’t leave, but attend school full-time and get good grades until they’re 24, that could also save you a few dollars, Deventer said.

In any case, if your insurer doesn’t give you a full list of options, ask to see what’s available to you.

Shop around: If you’re unhappy with your premium, see if another insurer offers you a better deal, especially if you have a great driving record. “Each company uses its own algorithm to determine rates,” Deventer said.

(The full Bankrate study can be found here.)

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