PFT #96 - Personal Finance Tip of the Week: Navigating the Rising Cost of Auto Insurance

According to Bloomberg, auto insurance rates in the US have increased by 37% since January 2020, and as of December 2024, the trend shows no signs of slowing down.This is understandably concerning.

When you factor in car payments, fuel, and maintenance along with insurance, auto expenses can easily become one of the largest budget categories.

Several factors contribute to this rise, with two major ones being the complexity of modern vehicle technology, including sensors, and the escalating cost of parts. Additionally, the average cost for a collision claim has reached $6,000.

For example, my own car’s bumper was tapped at just 5 miles per hour, and the repair bill exceeded $8,000.So, what can drivers do?

There are several strategies that may help reduce your insurance rates.If you're considering purchasing a new car, research the makes and models with higher insurance premiums, as costs vary significantly between vehicles.

Raising your deductibles can also lower your premiums, and you can reduce add-on coverage, such as rental car benefits while your vehicle is in the shop. Driving less reduces your risk of accidents, which in turn can lower your insurance costs.

Be sure to ask about available discounts, and if applicable, bundle your car and home insurance. In some states, completing a defensive driving course can also result in a premium reduction.

Accidents and violations typically remain on your record for 3-5 years, so if this applies to you, exercising patience may help in the long run.Many companies factor in credit scores when determining premiums.

While some claim they use a model based on credit behavior rather than an actual score, many people remain skeptical of this disti  nction.This ties back to the importance of maintaining a strong credit score, which we covered in episode #40.

In conclusion, while you can't control the overall cost of automobiles, you do have several options to help manage your insurance expenses.

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Episode Transcript

Speaker 1 (00:04):
Hello everyone, I am David and you were listening to
the Personal Finance Tip of the Week and this week's
topic is on navigating the rising cost of auto insurance.
According to Bloomberg, auto insurance rates in the US have
risen thirty seven percent since January of twenty twenty and

(00:27):
of this recording, we're at December of twenty twenty four.
This is understandably concerning. When you factor in car payments, fuel,
and maintenance along with insurance, auto expenses can easily become
one of the largest budget categories. Several factors contribute to
this rise, with two major ones being the complexity of

(00:47):
modern vehicle technology, including sensors, and the escalating cost of parts. Additionally,
the average cost for a collision claim has reached six
thousand dollars. So what can drivers do? Many options exist
to help you reduce your insurance rates. Let's review. If
you're considering purchasing a new car, research the makes and

(01:09):
models with higher insurance premiums. As costs can vary significantly
between vehicles, Raising deductibles can also lower your insurance premiums,
and you can reduce add on coverage such as rental
car benefits while your vehicle is in the shop. In addition,
driving less reduces your risk of accidents, which in turn
can lower your insurance costs. Another good move is to

(01:32):
ask about available discounts and, if applicable, bundle your car
and home insurance. Also, in some states, completing a defensive
driving course can also result in a premium reduction. So
what about accidents and violations. They typically remain on your
record for three to five years, so if this applies
to you, patients will pay off in the long run. Okay,

(01:55):
before we round this up, we do need to talk
about credit scoring and factoring premiums. This often goes under
the radar. Many companies factor and credit scores when determining premiums.
While some claim they use a model based on credit
behavior rather than an actual score, many people remain skeptical
of this distinction. This ties back to the importance of

(02:16):
maintaining a strong credit score, which we covered in episode forty.
In conclusion, while you can't control the overall cost of automobiles,
you do have several options to help you manage your
insurance expenses. So that will do it for the personal
finance tip of the week. Until next time. I am
David