Car insurance premiums around the U.S. are soaring. Here's why. (2024)

FAQs

Car insurance premiums around the U.S. are soaring. Here's why.? ›

Among the causes: disrupted supply chains from COVID, serious accidents from out-of-practice drivers and expensive repairs to technologically advanced vehicles. The average cost for a 12-month premium was $1,280 in 2023, according to the Insurance Information Institute.

Insurance tech firm Insurify found that auto insurance premium hikes were "largely due to the skyrocketing price of auto parts and the increasing number and severity of claims." And while increases may moderate, analysts still believe further premium hikes are on the horizon.

A confluence of forces were to blame: The Covid pandemic disrupted supply chains, pushing used car prices to record highs and making spare parts hard to get; out-of-practice drivers emerging from lockdowns caused more severe wrecks; and technological advancements like motion sensors made even the simplest parts, like a ...

It's also become increasingly more expensive to repair vehicles due to supply chain shortages, mechanic wage increases and additional technologies in vehicles such as microprocessors, cameras and other sensors — all of which contribute to higher vehicle and insurance costs.

If your car insurance goes up for seemingly no reason when you renew your policy, it's likely due to an increase in risk that's outside of your control. This could include reasons like increased claims in your area (due to more extreme weather damage, more accidents, etc.) and higher car repair and replacement costs.

With increasing costs across various parts of the automotive industry, from higher average repair costs to continuing supply chain issues, auto insurance companies have needed to raise rates to turn a profit.

Florida is the most expensive state for full coverage car insurance with an average annual cost of $3,865.

While it can seem arbitrary, there are actual reasons you can see your price go up and down. Car insurance rates can change based on factors like claims, driving history, adding new drivers to your policy, and even your credit score.

Increased car repair expenses for parts and labor and higher replacement costs can lead to insurance rate hikes. Additionally, economic factors, such as inflation and changes in interest rates, can impact insurers' investments, prompting them to adjust premiums to maintain their financial stability.

Why is Allstate so expensive? ›

Many factors contribute to Allstate being expensive, including rising costs for insurance companies and the way it pays its agents. Damage claims and payouts also factor into its higher-than-average rates.

Car insurance premiums don't automatically go down when you pay off your car, but you can probably lower your premium by dropping coverage that's no longer required. Banks and financing companies who loan you money for your car are called lienholders.

Geico is so expensive because car insurance is expensive in general, due to rising costs for insurers. But at $462 per year, the average Geico car insurance policy is actually cheaper than coverage from most competitors. In fact, Geico is one of the cheapest car insurance companies nationally.

Inflation. Nobody in America will be surprised to learn that inflation has spread to all areas of the economy, including car insurance. As vehicles become more expensive to repair and replace, car insurance rates climb as well. The price of both new and used cars has soared over the past few years.

If you buy directly from a Progressive company, your car insurance price reflects the cost of staffing and maintaining the sales centers, and a larger portion of our marketing costs.

On average, drivers with poor credit pay 118 percent more for full coverage car insurance than those with excellent credit. California, Hawaii, Massachusetts and Michigan prohibit or limit the use of credit as a rating factor in determining auto insurance rates.

More drivers on the road mean more traffic and more accidents. Auto insurers in California charge more expensive premiums to account for the higher risks of driving in the state.

Reasons Car Insurance Rates Are Increasing

A multitude of factors contribute to rising premiums, but these current increases can primarily be attributed to a rise in motor vehicle accidents, the severity of injuries in these crashes, and geographical factors.

More severe auto accidents in the wake of the Covid-19 pandemic due to issues like distracted driving and more speeding—as well as the fact that a higher share of claims ended up in litigation—have also helped to drive up insurance costs.

Your car insurance rate will increase if you get a ticket for a traffic violation or cause an accident, but there are other possible reasons as well. In 2023, many car insurance companies raised their rates to keep up with inflation or to account for higher claims than the prior year.