5 Reasons Your Auto Insurance Could Increase
From gas prices to grocery costs, it’s nearly impossible not to feel the pinch in your wallet these days. Unfortunately, the trend is the same for auto insurance and other car expenses. Here are five reasons you might see an increase in your auto insurance bill.
Don’t go without auto insurance
It’s crucial that you carry auto insurance and keep a record of it in your vehicle. It might be tempting to skip insurance because of the cost. But this is one expense you shouldn’t skimp on if you drive, according to Money Under 30.
The most important reason to carry auto insurance is that it’s illegal to go without it in all but two states. There are still penalties if law enforcement finds out you’re uninsured. In fact, in some states, you could even face a permanent suspension of your driver’s license or even jail time. It’s not worth the risk.
In the event of a car accident, you will want auto insurance. It doesn’t matter who caused the collision. You still want insurance to handle the expenses. Insurance can also protect your other assets in case of an accident. Insurance can help prevent the other driver from coming after your car, house, and bank account for compensation. Finally, car insurance protects you from liability for your passengers’ medical expenses if you’re at fault in an accident.
Buying insurance for your car is more than just the legal thing to do. It’s the smart thing to do. It might be painful to pay that bill, but the peace of mind for you and other drivers is worth the investment.
All that’s to say auto insurance rates might be increasing. Consider these reasons for why you might be paying more, and plan accordingly.
1. Inflation is real
According to Erie Insurance, the Consumer Price Index (CPI) has risen more than 7% since 2020. It’s the highest it’s been in over 40 years. So you’re paying about 7% more on all your bills, including auto insurance, than you were a couple of years ago.
2. Vehicle parts are also increasing in price
Inflation is hitting the auto industry hard. Though the average increase is 7%, inflation for vehicle parts is closer to 10%. An increase in vehicle parts means your insurance will need to pay more to repair your car. Your insurer will likely pass that price increase on to you through a hike in your insurance premiums.
3. Repair costs have gone up 20%
In addition, repairing your car costs even more thanks to supply chain issues and the labor shortage. It costs 20% more now to repair your car than it did in 2020. The issues in the supply chain and available labor can also cause repairs to take longer. That means you could be in rental vehicles longer, placing a strain on your insurance company through the cost of claims.
4. Cars cost more now
Used car prices have skyrocketed 27% since 2021. And new car prices have gone up more than 14%. Pricier cars mean higher auto insurance premiums.
5. People are driving more, causing a spike in accidents
People weren’t driving as much in 2020 and 2021 because they stayed home more. That meant less wear-and-tear on their vehicles and also fewer accidents. Now, more motorists are on the road, leading to more car crashes. Sadly, these accidents are also becoming more severe and causing more fatalities. Therefore, the increased risk causes higher auto insurance premiums.