In almost every state, drivers need to have an active insurance policy that meets certain minimum requirements before they get behind the wheel. Unfortunately, the typical cost of that insurance has been on the rise in recent years. According to Nerdwallet, which looked at auto insurance rate statistics reported in the Consumer Price Index (compiled by the U.S. Bureau of Labor Statistics), premiums increased by about 7 percent in 2016 compared to the prior year. In recent years, annual rate hikes have usually been only around 3 or 4 percent. And most financial experts expect American drivers will have paid even more for their insurance in 2017 and deal with rising rates for the foreseeable future. That's because of a combination of recent factors:
- More people are driving more frequently, leading to an increase in car accidents and related injuries.
- Damage claims have grown more costly as cars have become more technologically sophisticated.
- The average cost of medical claims related to automotive accidents has also risen.
The net effect of these broad trends is seen in higher insurance premiums across the board, as well as new costs and complications involved in reimbursing claims for accidents and damage. If all of this has you rethinking your car insurance spending, there are several ways to search for better deals, find detailed quotes and get approved for a plan that fits within your budget and protection needs.
Common insurance misconceptions
Even though most drivers need it and many options exist to find it, car insurance shopping remains a tall order. Don't make this task any harder on yourself by making these common mistakes or holding onto some popular misconceptions:
- There is no one company with the cheapest insurance. Auto insurers spend big on advertisements on TV, in print and online to promote themselves as the best option, but none of them can correctly claim to offer the cheapest coverage for every driver.
- Insurance premiums vary depending on the type of car you drive, not just your history as a driver. Few car buyers take this consideration into account when looking for a new vehicle.
- Comprehensive coverage or insurance for specific types of claims (like collision damage) is not required by most state laws, and often adds quite a lot to your bill. However, this additional coverage might be required if you are leasing the car, or if you used a loan to pay for it.
In the end, the single most important thing to remember is that shopping around and comparing quotes is the best way to save money. With that in mind, you might be wondering how to start this entire process, whether you're buying another vehicle or are able to switch providers.
When and how to switch
According to Consumer Reports, which tracks auto insurance reviews and makes recommendations, most drivers would benefit from a review of their policy every two or three years. It might be wise to start the shopping process even sooner if you just completed a major life event like marriage or a home purchase, as these changes can affect your insurance premiums for the better.
In the process of surveying your options, don't neglect the little guys. Local and regional insurance firms, even your local bank, might offer great coverage plans at a reasonable price. According to Consumer Reports and other car insurance experts, some of the most well-regarded insurers are smaller companies with a regional or local focus.
Consumer reports made some other suggestions for shopping and comparing insurance:
- If you are a generally safe driver and haven't had to make a claim on your insurance in years, consider switching to a policy with a higher deductible. This is one of the best ways to reduce your regular premium, but it will result in higher out-of-pocket costs if you do need to file a claim. Make sure you can keep saving diligently to protect against the cost of potential claims that aren't fully reimbursed.
- At the same time, know when it makes sense to pay for additional liability coverage above the minimum amount your state requires. A claim made against you by another driver could result in an expensive lawsuit that puts your financial assets at risk. In a similar vein, getting into an accident where an uninsured driver is at fault could end up costing you without the proper coverage.
- Dig a little deeper into the fine print of insurance policies and procedures, as well as trusted reviews. For example, check the repair procedures for a policy you're considering or one you're already paying into - check if the company replaces damaged components with original equipment manufacturer (OEM) parts, since they usually fit better but often cost more money.
Finally, keep in mind that various discounts and promotions offered by insurance plans may be more than meets the eye. Most insurers offer a laundry list of discounts for drivers who switch from another provider, or bundle their auto insurance with home or life insurance plans, or for kids who get good grades, and on and on. Insurance companies like to rave about all the discounts customers can take advantage of, but they might not be as lucrative as drivers are led to believe. According to research from Consumer Reports, bundling policies only saved drivers about $63 per year on average. For an even more disappointing example, it found that discounts for installing anti-theft equipment netted savings of just $2 per year for some drivers.
Navigating car insurance options might get complicated, but saving up for and affording it shouldn't have to be. Talk to the pros at Landmark Bank for more information about everything related to auto financing.
Insurance products and services are not FDIC insured, not insured by any federal government agency, not a deposit or bank obligation, not financial institution guaranteed, subject to risk, including potential principal loss.
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