Have you noticed the cost of your car insurance continuing to climb? If so, you’re in good company.
“For 2023, 43 states and the District of Columbia reflected an effective rate change greater than 10%, pushing the calculated nationwide effective change of 14% during the year. Only 26 states had a double-digit effective rate increase in 2022, translating to a calculated national average increase of 11.4%,” according to a 2024 S&P report.
This increase in rates can be chalked up to a host of economic factors and the market climate at large. That being said, you can still save on your insurance despite feeling the financial squeeze.
How does inflation affect insurance costs?
Inflation continues to affect the cost of car insurance. Inflation increases the cost of supplies and labor, which means insurers must pay out pricier claims.
The Consumer Price Index for All Urban Consumers rose 0.4 percent on a seasonally adjusted basis in December after rising 0.3 percent in November, according to the U.S. Bureau of Labor Statistics. The motor vehicle insurance index increased 11.3% from December 2023 to December 2024.
“With inflation hitting an astounding (high), general cost increases have affected several components of car insurance from repairs to replacement costs, where insurance companies are paying out more to buy comparable cars when their customers’ cars are totaled,” says Loretta Worters, vice president of the Insurance Information Institute, or III, an insurance industry association.
Why are insurance costs on the rise?
Car insurance rates are climbing due, in part, to increased repair costs driven by sophisticated technology improvements in newer vehicles. Additionally, the rising frequency and severity of auto-related accidents contribute significantly to the uptrend in insurance premiums.
In order to combat these rising costs, it is important for drivers to regularly review their car insurance policies and shop around for the best rates. It is also essential to practice safe driving habits, such as obeying speed limits, avoiding distractions while behind the wheel, and maintaining a safe following distance.
“Some motorists may see an increase in auto insurance rates due to a rise in accident frequency, accident severity and replacement parts inflation,” Worters says.
In addition to these external factors, it is also crucial for drivers to maintain a clean driving record in order to keep their insurance rates low. This means avoiding accidents and traffic violations, as they can result in increased premiums or even policy cancellation.
Find out which states are raising auto insurance rates in 2025
Frequency and severity of auto accidents
The COVID-19 pandemic brought about major changes in our daily lives, including how people commute. With lockdowns and restrictions in place, there were significantly fewer cars on the road. However, this did not translate to safer roads as one might expect.
Despite fewer cars on the road, traffic fatalities rose during the pandemic due to riskier behavior, including increased speeding and reduced compliance with safety laws. The reduced traffic may have given a false sense of security leading to more severe accidents.
See the trends over time for Americans killed and injured in crashes in the table below.
| Year | People killed and injured in auto crashes |
| 2018 | 36,835 |
| 2019 | 36,355 |
| 2020 | 39,007 |
| 2021 | 42,939 |
Disaster-related claims
Natural disasters, from floods to wildfires, can wreak havoc on vehicles, often resulting in comprehensive insurance claims that drive up overall policy costs. Insurers adjust premiums accordingly, reflecting the increased risk and frequency of such catastrophic events.
“The challenge has also been difficult with premiums lagging behind the rate of inflation, while claims costs have increased,” Worters says.
Increased auto repair costs
Motor vehicle maintenance and repair costs were up 4.1% from August 2023 to August 2024, according to the U.S. Bureau of Labor Statistics.
“The introduction of new automotive technology improved safety — think crash avoidance sensors — and increased fuel efficiency, such as replacing steel with aluminum, have increased the cost of either repairing or replacing damaged vehicles,” Worters says.
What to do when car insurance rates go up
How to save on car insurance despite increasing costs
While you can’t control inflation or interest rates, you can shave off some dollars on your insurance premium.
“When looking at inflationary issues, you’re going to get hit from every direction – from buying a car, gas and the insurance for the car,” Worters says. “It’s a good idea when shopping for a vehicle to check with your insurer to see what the cost will be before you buy it.”
Here are other ways to save on car insurance:
- Think twice between leasing or financing a vehicle. You might also think twice before leasing a new car or taking out a loan on your new car: “You’ll need to pay for collision insurance as well as liability, which can significantly increase your premiums,” she says.
- Take a defensive driving course. Take a defensive driving course, which can shave anywhere from 5% to 20% off your car insurance, but this discount isn’t available in all states.
- Pay upfront or sign up for autopay. Other discounts include paying your premium upfront or signing up for autopay. Some insurers will bump down your premium by 3% to 5%.
- Drop coverage you don’t need. If you have a low-value vehicle that’s paid off, you can save money by dropping comprehensive and collision coverage.
- Bundle your insurance. You can also save by bundling your insurance, such as with homeowners, condo or renters insurance.
- Compare rates. Get quotes from several insurers to compare rates. This will ensure that you get the most affordable insurance.
- Maintain a clean driving record. You’ll save money if you don’t have to pay surcharges for accidents and tickets.
- Increase your deductible. This is a great option if you have plenty of savings to cover the deductible if you must make a claim.
- Sign up to have your driving monitored. Telematics is a great way to save money on your policy.
Read more about drivers switching car insurance carriers as inflation continues
You might also be interested inResources & Methodology
Sources
- Edmunds. “Catalytic Converter Theft: What You Need to Know.” Accessed December 2024.
- NHTSA. “NHTSA Estimates Traffic Fatalities Dropped in the First Three Months of 2023.” Accessed December 2024.
- NHTSA. “Traffic Safety Facts Annual Report Tables.” Accessed December 2024.
- S&P Global. “Largest US private auto insurers boost rates by double digits in 2023.” Accessed December 2024.
- U.S. Bureau of Labor Statistics. “Consumer Price Index Summary.” Accessed January 2025.
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