How to rein in rising auto insurance rates

EVEN as inflation has eased, car insurance rates are rising by double digits. But drivers have some options for reining in premiums.

According to the Bureau of Labour Statistics, auto insurance costs were 19.5 per cent higher in June than a year earlier. Insurers blame the higher cost of automobiles, parts and repairs, as well as more accidents because of lingering bad driving habits that spread during the depths of the pandemic. They have also cited increased losses from severe weather, including hailstorms.

Most drivers already know about discounts available for “bundling” auto and homeowner insurance policies with the same carrier or for insuring multiple cars. But other tactics can help as well.

Becoming a better driver may keep your costs down. Just one accident can mean you are paying an average of 43 per cent more than drivers with clean safety records, according to financial website Bankrate, which analysed insurance data from Quadrant Information Services. The average annual premium for a driver with full insurance coverage and a pristine driving history is just over US$2,300, the analysis found, while the average for a driver with one at-fault accident is about US$3,300.

Cultivating safe habits behind the wheel – like setting your phone to “do not disturb” to avoid distraction, and keeping a safe distance from the car in front of you – can help avoid accidents, said Ryan Pietzsch, a driver safety expert with the National Safety Council, a nonprofit focused on reducing preventable injuries and death.

Pietzsch suggested following the “three second” rule: Note the car ahead of you as it passes a fixed object, like a sign along the road. Then, start counting slowly from one to three (say, “one, one thousand; two, one thousand; three, one thousand”). If your car passes the sign before you reach three, you are too close.

Taking a safe driver course may save you 10 per cent on your auto premium, said Benjamin Preston, an auto writer at Consumer Reports. Check with your agent to see if it is an option in your state. Some courses charge a fee.

Most insurers now offer monitoring policies, in which insurers track your driving habits, like speeding, hard braking and phone use, via an app or a device installed in your car. Drivers who perform well pay lower rates, but many people are wary of being tracked by their insurer. (Some automakers and apps have been criticised for sharing data without the drivers’ awareness.) Pietzsch said he participates in such a programme and thinks the trade-off is worth it. “Being aware of what you are doing is the first step,” he said.

Seeking quotes from several insurers once a year can take time, but can yield lower rates, said Doug Heller, an insurance expert with the Consumer Federation of America. “Give yourself a couple of hours,” he said, “and you could save a couple hundred dollars.”

You can seek quotes online from individual insurers or use an independent insurance agent – one who represents multiple insurers. Consider not just the big companies that advertise with funny mascots, but also regional insurers that are not household names but may offer better prices and good service. Have your current policy handy, so you can be sure you are comparing similar coverage.

Before choosing a carrier, review consumer complaint data reported to the National Association of Insurance Commissioners. “It is good to save money on auto insurance, but it is not good to have an unreliable company,” Heller said.

A higher deductible – the amount you will have to pay out of pocket for a claim – can reduce your premium. Increasing your deductible to US$500 from US$200 could reduce the cost of your collision and comprehensive coverage by 15 per cent to 30 per cent on average, according to the Insurance Information Institute, an industry group. Going up to a US$1,000 deductible could save 40 per cent or more.

Collision coverage pays for damage to your car from an accident, while comprehensive coverage covers theft and damage from events like hail, flooding or hitting a deer.

The trade-off for a higher deductible, of course, is that you will pay more out of pocket if you have to file a claim.

If your car is older, you can consider reducing or dropping collision and possibly comprehensive coverage, which are usually optional unless you have a loan or lease on the car. Consider dropping collision if the annual premium is more than 10 per cent of a car’s value, Preston said.

Various online sites, like Kelley Blue Book, can give you approximate values. But because used cars are worth more now, this may not be as much of an option as it used to be.

Insurance experts advise caution before lowering liability coverage, which protects you financially in case you cause an accident that injures someone else or damages someone’s property. Most states mandate minimum liability insurance, but bare bones coverage may not be enough to pay for damage and medical bills resulting from a serious crash. “I would not skimp on liability,” said Beth Swanson, a licensed insurance agent and a writer at The Zebra, an insurance search site.

Improving your credit score – a three-digit summary of what is in your full credit report – could also help you qualify for lower auto rates. In most states, insurers can use a version of your credit score as a factor when setting auto premiums (exceptions include California, Hawaii, Massachusetts and Michigan), according to The Zebra. Insurers say higher scores are correlated with a lower risk of filing claims.

To bolster your credit score, pay your bills on time each month, refrain from opening new card accounts and reduce the proportion of your available credit that you are using – “utilisation,” in credit lingo. People with clean driving records and fair credit pay annual premiums that are on average 49 per cent higher than similar drivers with excellent credit, according to a 2023 study by the Consumer Federation of America, based on the cost of state-mandated insurance coverage. Many credit card companies allow you to see your credit score free online, so you can track your progress.

Here are some questions and answers about auto insurance:

What other factors can affect my insurance premium?

If you have had a change in your life – say a child away at college who is not driving your car for much of the year – you could get a lower rate because teenage drivers are typically more expensive to insure. Getting married may also help; married couples typically qualify for lower rates than single people.

If you have retired – or if you have moved closer to work or have switched to working at home rather than driving to an office – let your insurer know. Premiums are based partly on the distance you drive each year. So if you are logging fewer miles, you could qualify for a lower premium.

What is “accident forgiveness” coverage?

Some insurers may agree to exclude a first-time accident from premium calculations for customers who have had several years of incident-free driving, said Shannon Martin, a licensed insurance agent and a writer at Bankrate. Details vary by insurer, though. Some companies charge a fee to add the coverage if a customer qualifies, while others may add it free after a certain period of time.

Does the type of car I drive affect my insurance premium?

Yes. “Some cars are more expensive to insure than others,” said Loretta Worters, a spokesperson for the Insurance Information Institute. So if you are car shopping, check with your insurer to see what the premium for your preferred car would be. Factors like the cost of repairs, the likelihood of claims and a car’s safety features can all affect premiums. NYT

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