Why the Average Car Insurance Price Is Rising—and What You Can Do About It

Discover actions you can take to help counter the rising costs of car insurance premiums.


Toy car moving over stacked coins with car keys Getty

Why the Average Car Insurance Price Is Rising—and What You Can Do About It

Beef. Eggs. Meals out. Used cars. These days, it feels like every aspect of life has been affected by pervasive inflation. You probably see it in the bill when you go to the grocery store, when you shop for clothes or when you take that much-needed vacation. And your car insurance premiums could be rising, too. 

If you're wondering why your car insurance costs a lot, it might be because your rates have gone up. While you can control some factors affecting your rates, there are also reasons beyond your control that can cause them to increase (the same applies to factors that can lower your rates).

As of February 2024, average car insurance costs have gone up a whopping 21% year over year according to the U.S. Bureau of Labor Statistics. 

While inflation certainly plays a role, every aspect of the auto insurance business has become more expensive. As vehicles become more sophisticated and technology improves, individual components are more expensive and the cost to repair them increases. Additionally, an increase in natural disasters and severe storms are another critical area driving up insurance costs. 

10 Reasons Why Car Insurance May Increase

Here are some common reasons why your car insurance rates might go up:

1. Traffic Violations: Speeding tickets and other moving violations tell your insurance company that you're more likely to have an accident. The more speeding violations you have, the higher your risk, leading to a rate increase. Even minor violations could raise your rates.

2. Accidents: Whether you're at fault or not, accidents on your record indicate risk to insurance companies. At-fault accidents can increase rates, and in some cases, even not-at-fault accidents can cause a hike, depending on state laws and insurers' data.

3. Comprehensive Claims: Claims for incidents like theft, vandalism, hitting a deer or weather-related damage can lead to rate hikes, depending on your policy and the laws in your state.

4. Adding Vehicles or Drivers: Buying a more expensive car or adding high-risk drivers, like teens or those with poor records, can raise rates.

5. Financed or Leased Car: Because you don’t own the car yourself, you have less of a say in how much insurance coverage you purchase. The lender or leasing company will require sufficient coverage to safeguard their investment, possibly resulting in higher premiums than you’d pay if you owned the car and select your own coverage levels.

6. Local Claims: Rates can go up based on claims data in your area, even if you have a clean record.

Residing in areas with costly car insurance repairs or a high risk of theft or vandalism can raise insurance premiums. Similarly, living in regions prone to severe weather conditions, such as flooding or hail, also can lead to higher rates.

Moreover, whether you live in a rural or urban setting can influence your car insurance costs. Insurance premiums are often higher in cities because the likelihood of accidents increases in densely populated urban areas, where more vehicles are on the roads.

7. Moving: Changing your address can sometimes increase rates due to changes in risk factors associated with different areas.

8. Age: It may seem unfair, but two factors beyond your control—age and gender—may impact the cost of your auto insurance.

Gender isn’t considered by car insurance companies in every state. Six states—California, Hawaii, Massachusetts, Michigan, North Carolina and Pennsylvania—prohibit using gender to determine auto insurance prices. In other states, men typically pay more than women because they tend to engage in riskier driving behaviors.

Regardless of location or gender, young drivers usually face the highest insurance rates due to their limited driving experience.

As people age, auto insurance rates generally decrease. However, around age 65, car insurance costs for senior drivers often begin to rise again.

9. Lapse in Insurance Coverage: Coming off a lapse in coverage can lead to higher rates when reinstating or starting a new policy.

10. Loss of Discounts: Losing discounts for things like a clean driving record or switching home, condo or renters insurance from the company where it was bundled with car insurance can increase rates, even if you didn't have any incidents.

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7 Ways to Lower Auto Insurance Premiums

Here are seven tips for lowering your car insurance premiums.

1. Conduct a car insurance comparison. 

Look at your own insurance first.

As car insurance premiums rise, your best bet is to look closely at your current policy. Do you have any coverage that you no longer need? The COVID-19 pandemic changed the definition of “workplace,” and many more Americans are working from home and driving less than they were before. If you are driving a lot less than you used to, tell your insurer. You may qualify as a low-mileage driver.

Check out your options.

Explore your possibilities with AAA Triple Check.* Simply bring your car insurance policy—from any company—to your nearest AAA branch, and an agent will review it with you. This analysis will determine what coverages your policy includes and help you to identify discounts you qualify for with AAA Insurance.** Or, if you prefer, you can call and speak to an agent to get a AAA Insurance quote.

2. Bundle your car insurance with your homeowners, condo or renters insurance.

One way to lower your car insurance cost is to bundle your auto insurance and homeowners, condo or renters insurance together with the same insurer. Let’s say you already have a homeowner’s policy with one insurer; you can call an agent and inquire about adding an auto policy to see how much you might save in comparison to other insurers. Or you can look around to see which insurers have the best insurance bundling offers.

By consolidating these two types of insurance with the same company, you can save money—sometimes up to 20%. Payments and communications are easier and more convenient when you only deal with one company, too. Bundling is a win-win if you’re getting the coverage that you want and need from both policies.

3. Increase your deductible to lower your car insurance premium.

You can lower your car insurance premium by increasing your deductible. Your deductible is the amount you’ll have to pay out of pocket should you file a claim. If you’re willing to take on more risk, you can save some money on your premium. 

Let’s say you know you’re a great driver, drive what’s considered a safe car and haven’t been in a crash for many years. It may be a reasonable to raise your deductible. But you can’t predict things that are out of your control of course, such as other drivers’ behavior or the weather. You want to strike a balance and be comfortable with your own level of risk tolerance.

4. Sign up for online autopay.

Paying your bill on time is a good way to ensure that your account never gets flagged for late payment. When you use online autopay, the insurance company knows they will get paid in full and on time. As a result, they frequently offer a very significant discount for this payment option.**  

5. Save on car insurance by buying the right car.

Some cars cost more to insure than others. It’s not just sedans versus muscle cars. Newer cars often cost more to insure than older versions of the same model due to their higher repair costs and replacement values, but newer cars with lots of safety features and high safety ratings tend to have lower auto insurance costs.

In 2024, the least-expensive cars to insure include many small and midsize SUVs, such as those made by Honda and Subaru. Some of the most-expensive vehicles to insure included models by Tesla, Dodge, Mercedes and Cadillac.

So, whether you are in the market for a new car or a used car, you may want to take these factors into consideration to save money over the long term.

6. Consider usage-based car insurance.

Many insurance companies offer usage-based policies by recording driving habits in real time through a smartphone app, such as AAADrive. (AAA Members—even those who use a different insurer—can access AAADrive in the AAA Mobile app and use it for improving their driving skills, monitoring teens’ driving habits, gamifying safe driving on a long trip, and other practical uses.)

If you go this route to save on insurance costs, be sure to activate the usage function in the app. If you don’t, the insurance company might remove the discount and your rates could go up after just a month or two.

Likewise, if you receive any other discounts in an insurance quote that require an action on your part, make sure you follow through on the action so your rate doesn’t go up without warning.

man looking at his phone sitting in car Getty

7. Know where to go.

If you are in a crash, a tow truck will come and take your car to the nearest mechanic. If you want to make sure you’re headed to a trusted and vetted mechanic, go to AAA.com/ApprovedShops to find the AAA Car Care center or AAA Approved Auto Repair facility closest to you. 

Eventually, inflation will subside, and things will come back into balance, but these tips for lowering the cost of car insurance will never go out of style.

This information is being provided for general informational purposes only. The Auto Club Group does not assume any liability in connection with providing this information.

 

* Not available in Colorado.

** Coverage is subject to all policy terms, conditions, exclusions and limitations. Discounts and savings opportunities subject to eligibility requirements. Subject to underwriting requirements. AAA Insurance is a collection of AAA branded insurance products, services, and programs made available to qualified members. Personal lines insurance is underwritten by one of the following companies: Auto Club Insurance Association, MemberSelect Insurance Company, Auto Club Group Insurance Company, Auto Club Property-Casualty Insurance Company, Auto Club South Insurance Company, Auto Club Insurance Company of Florida, or nonaffiliated insurance companies. ©2024 The Auto Club Group. All rights reserved.

Not available in South Carolina, North Carolina or Colorado. AAADrive™ participation is optional. Subject to terms, conditions and availability. AAADrive Auto Insurance Discount is not available in all states. Download of the mobile app, activation of AAADrive and the ability to record journeys are required to receive the discount. Savings may vary and are based on driving behavior. Discounts apply to select coverages only and do not apply to statutory assessment and fixed expense fees. Discounts may vary by state. Please refer to the Terms & Conditions for more information to determine participation eligibility. Check your phone's eligibility at Google Play or the App Store by texting MobileApp to 99513. If your phone does not meet the requirements, you will not be able to download the app. Must meet minimum qualifications to maintain discount at renewal.


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