When economists explain why inflation is still increasing, they point to the usual suspects: higher food prices, rising energy costs, and medical bills. These days, they need to add another item to their list: insurance, because this one is really popping.
Money.com compiled a list of items likely to become more expensive even though the rate of inflation is slowing. The Top 5 on that list are: auto insurance, some electric vehicles, health insurance, homeowners insurance, and restaurant bills. Look carefully and you’ll notice that three of their Top 5 are related to insurance.
If you own a vehicle, you’ve certainly noticed that premiums are soaring – much faster than inflation. Nationwide, it’s up nearly 14% from just a year ago. A report in The Philadelphia Inquirer said that premiums in the Philadelphia metro area jumped 154% in one year, rising from $1,872 to $4,753; this was the largest increase in the average cost of car insurance in the country!
And Philly is far from the only city where motorists are feeling the pinch. Residents of DC are in the same boat because of the rash of auto thefts and carjackings there. Elsewhere, a combination of natural events and general inflation have combined to produce an insurance nightmare.
Before you start a GoFundMe campaign for drivers in Philly and DC, be aware they’re not even paying the highest premiums. Bankrate says that dubious honor goes to drivers in Detroit; Motor City motorists spend $5,687 a year for full coverage. On the flip side of this coin, car insurance is lowest in Seattle, where the cost is “just” $1,759. Rates in New York State vary sharply depending on the particular area. New York City residents are feeling a chokehold around their necks.
Somebody Gimme A Break
Hard-pressed motorists hoping for a break on their premiums are not getting one from Mother Nature. Just look at what’s happened in California.
Recent unusual atmospheric river deluges there have caused at least $11 billion in damage - and this number may yet increase. Many cars in Los Angeles were literally swept away by floods and many homes suffered substantial property damage as well. While some sections of LA were deluged with 10 inches of rain and the city suffered over 400 mudslides, the entire state suffered damage – from LA in the south to San Francisco in the north – and all areas in between.
These storms also created difficulties for numerous insurance companies, and their clients have already begun the process of making claims. When insurance companies have to pay claims, they pass those bills along to their clients, so there are no happy campers, but that’s how the system works.
Across the country, auto insurance rates jumped 26% in the past year, and the recent storms will certainly exacerbate the problem. Moreover, this is not just a fluke or an aberration, as they have soared 43% since 2022. On the bottom line, when all the smoke clears, you and I should anticipate getting very hefty bills in the mail over the upcoming months.
Cutting Costs
There is precious little any of us can do about an actuary’s calculations or unusual weather events. Still, there are some things we can do that might help us save a few dollars on our auto insurance premiums or at least slow their rate of increase.
The first of these is to drive cautiously. Going through red lights, stop signs, and speeding can cause dangerous accidents. In addition, they also can lead to very expensive tickets and jack-up already exorbitant premiums.
A study by Bankrate found that the average cost of car insurance in New York, already among the highest in the country, increases by 12 percent following a speeding conviction, and could remain elevated. Obviously, this adds up to a substantial amount.
According to moneygeek.com, insurance premiums in New York have increased on average by 14.2% over the past six years, “and show no signs of slowing down.” It’s worth reminding readers that defensive driving classes can save lots of money – often hundreds of dollars a year, depending on the driver’s exact address and how many vehicles he or she wants to insure.
Unfortunately, just by virtue of living in New York, it follows that your car insurance will be expensive. The following ideas, which appeared in MoneyGeek, can help ease the pain.
Compare Rates: There are many similarities in the policies car insurance companies offer, but they are not exactly the same. That’s why you may find plans at some companies more suitable to both your needs and your wallet. Just because a plan looks like a bargain doesn’t mean that it is. Be sure to know exactly what it covers – and what it does not – and consider switching.
Bundling: Some insurance companies offer clients a “bundle,” which enables them to purchase home, auto, and sometimes other policies in one package. MoneyGeek says bundles could help clients save as much as $833/year.
Take Advantage of discounts when eligible. Some insurance companies offer discounts for serving in the military, and for teachers and members of various organizations. Check with the carrier to learn if you are eligible for any of them.
Raise Your Deductible: If you’re looking to save on premiums, you may consider raising your deductible, but this is a mixed blessing. On the one hand, policies with higher deductibles have lower premiums. On the other hand, the policyholder will have to pay more out of pocket for claims he or she files. This will save money in the short term, but needs careful thought and should be discussed with your agent.
Blame It On The Weather
Weather-related higher insurance payments are the latest in a growing string of developments that are impacting both the economy and consumers. “We are going to see once in a lifetime opportunities to buy a car and invest in real estate because a lot of people are not going to be able to pay all the new costs and expenses that are about to hit,” said John Williams.
“We’re walking into an insurance crisis in this country,” claims Williams. “Losses from the recent storms in California are going to be a disaster for car insurance, home insurance – all of us. You have to ask yourself, ‘How many Americans can really afford food, rent, to make car payments and pay their car insurance? They can’t. Americans are being pushed off the cliff. We’re going to start seeing defaults in this country the likes of which we’ve never seen before.”
Hopefully Williams is mistaken. Still, I’m curious. Has anyone checked the weather forecast?
Sources: bankrate.com; inquirer.com; money.com; moneygeek.com; YouTube: thisisjohnwilliams.com; aninsurancecrisishasbegun.com
Gerald Harris is a financial and feature writer. Gerald can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.
