Why you need to re-shop for your auto insurance right now

• It’s time to re-shop for your auto insurance.
• Why are costs increasing?
• Here we tell you what to do

There is a high chance that your auto insurance has recently increased. If so, you are not alone.

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Time to change insurance

According to recent data from the US Bureau of Labor Statistics, the average cost of auto insurance has increased by 19.1%.

That compared to the same period last year.

If your rates have increased, financial expert Clark Howard says it’s time to shop around for auto insurance again.

But what are the reasons why costs are increasing?

Why car insurance rates are increasing

The average annual cost of car insurance in the United States is around $1,780. However, what you pay could be much higher or lower.

What you pay depends on many factors, such as where you live, what you drive, and your driving history.

But even if none of these factors change, you may still see changes in your auto insurance premiums this year.

So what is causing the rate increase?

Accident damages are more expensive

«The auto insurance market is in a bind because the cost of repairing vehicles has increased significantly in recent years,» Clark says.

Supply chain disruptions during the pandemic led to some of the highest inflation rates in decades.

«The cost of vehicle repairs has increased faster than inflation since 2012,» according to BLS data.

Data shows that the maintenance and repair rate of motor vehicles in January 2023 increased by 14.24% compared to the same period in 2022.

Insurance companies rate policyholders differently

For insurance companies, each insured represents a risk. Therefore, before offering you insurance, insurance companies try to calculate how much risk you represent.

Companies use what are known as rating variables to do this.

Typical scoring variables include the driver’s age, gender, and accident history, as well as the model year of the vehicle being driven.

Other rating variables may include: Credit score, education, employment, home, marital status and occupation.

Insurance companies reinvest premiums

When you sign up for insurance, you establish a contract with your insurer.

In exchange for paying a premium, your insurer offers you financial protection against major losses due to covered events.

But insurance companies don’t just take financial risks. They diversify risks by reinvesting the money obtained from premiums in other areas.

«The factor no one talks about is that the way insurers ultimately make money is through investments,» says Clark.

Their investments plummeted

«And their investments plummeted just like the rest of us who experienced what happened in the market.»

How an insurance company reinvests collected premiums will vary from company to company.

Which means that different companies may experience a greater or lesser financial impact depending on their investments. As an insured, this difference will affect you.

«And this is the most important thing you should know: the cost of insuring your vehicle right now has a greater disparity from one insurer to another than it normally would.

How to save on car insurance

1. Compare prices: Comparing auto insurance prices is one of the best ways to make sure you’re getting a good coverage rate.

2. Ask about discounts: Be sure to find out what discounts an insurer offers that could save you even more money.

3. Increase your deductible: According to the Insurance Information Institute, «increasing your deductible from $200 to $500 could reduce the cost of your collision and comprehensive coverage by 15 to 30 percent.»

4. Avoid small claims: It’s no secret that your auto insurance will likely increase after you file a claim. «Complaints really hurt you.»