If you’ve noticed that your auto insurance cost has spiked higher over the past year or two, you aren’t alone. According to one report, full coverage auto insurance rose by 26% in 2024 for the average driver. Even U.S. Consumer Price Index (CPI) data found that car insurance rates increased by 21% in the 12-month period that ended in February. This is the most rapid rise in insurance costs since 1976.
Of course, nobody likes when their car insurance costs go up, but it can help to understand why it’s happening, as well as what you might be able to do about it.
The reasons for higher prices
There are several factors that contribute to your car insurance cost. If your credit history has worsened, you got a ticket or were involved in an accident, or you had a major life change like a divorce, these can all cause your car insurance rates to go up.
However, drivers are seeing 20%-plus spikes in their insurance costs, even if none of these factors apply. Unfortunately, there are some identifiable reasons why car insurance premiums have risen sharply for drivers across the United States.
For one thing, the cost of repairing a vehicle has gone up in recent years. There are labor shortages in the industry, parts have become more expensive, and wages for mechanics have generally increased. Since auto insurance premiums are designed to account for the potential costs if the car insurance company has to pay for a repair, higher repair costs translate into higher premiums.
In addition, there have been more claims filed by drivers in recent years. The exact reasons aren’t totally clear, but collisions and traffic deaths are significantly higher than they were just a few years ago. There have also been a higher-than-usual volume of disaster-related claims, such as flooding, in recent years.
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How to save money on your car insurance
The primary way you might be able to save money on car insurance is to shop around for it. Many people simply renew with the same insurer year after year. But the reality is that it only takes a few minutes to get other insurance quotes, and while you won’t always find a lower rate, it’s worth trying — especially in today’s insurance market.
Beyond shopping around, there are a few ways you might be able to save money on your car insurance.
- Check your deductibles: It’s a good idea to review your coverage every so often to see if you might be paying for more coverage than you need. For example, if you could afford a $1,000 deductible on your comprehensive coverage, changing it from a $500 deductible can make a significant difference on your recurring bill.
- Move to a cheaper state: Car insurance costs can vary dramatically by location. Drivers in the most expensive states pay more than four times as much as those in the lowest-cost locations. If you live in a place where car thefts are low, severe weather is rare, and accident rates are relatively low, you might be able to save money.
- Improve your credit: Studies have repeatedly shown that drivers with higher credit scores are less likely to file claims, so insurers take your score into account (in most states) when pricing your policy.
- Bundle your insurance: If you have auto, homeowners, and life insurance with different companies, see if you could get a discount for bundling them together.
- Get a different car: As a general rule, luxury cars and rare vehicles (for which replacement parts aren’t readily available) are often the most expensive to insure. Popular non-luxury models tend to be far cheaper to cover.
- Complete a defensive driving course: Many insurance companies will give drivers a discount for this.
This certainly isn’t an exhaustive list, and of course, not all of these will apply to everyone. But the point is that there are likely several things you can do to help mitigate rising auto insurance costs.
The bottom line
To be sure, there are a lot of reasons why car insurance is skyrocketing that you can’t do anything about. For instance, while some of the rising cost of car repairs has to do with temporary headwinds (like labor shortages), much of it is due to the same inflation that caused your grocery bills to rise.
On the other hand, there’s a lot that is in your control. Shopping around for a better rate on your car insurance can be quicker and easier than you might think, and it could take just a few minutes to review your deductibles and coverage limits to see if there’s any way to save.
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