If your car has been parked in the garage for most of the COVID-19 pandemic, you might be wondering why in the world are your insurance rates going up.
Maybe you’re working remotely and don’t commute to the office anymore. Or perhaps you don’t feel comfortable going to the grocery store, so you have food delivered. You might even be putting off that road trip during a stay-at-home or shelter-in-place order.
Whatever your situation might be, if you’re driving less, it stands to reason you pose less of a risk as a driver. So why are your rates going up? How can auto insurers justify charging more?
Let’s take a closer look.
How much is car insurance costing Americans these days?
According to a recent insurance industry report, the average American pays more than $1,400 a year for car insurance coverage. And if that sounds like a whole lot, you’re right: auto insurance rates have increased at more than twice the rate of inflation.
Current national rates are 24% higher than in 2011, and some states’ auto insurance rates have increased as much as 18%.
What determines your premium rate?
A lot of factors can impact the price you pay for auto insurance:
- Local and state laws
- Population changes and urbanization
- Your claims history and driving record
- Adding new drivers to your policy or changes of the primary drivers of vehicles on the policy, especially teenage drivers
- Removing a vehicle from the policy
- Change of employment
- A history of convictions or driving violations, such as traffic tickets
- Changes to your insurance plan’s structure or payment plan fees
- Your credit history
But why the recent surge?
While all the factors mentioned above can certainly impact your premium, they don’t account for the recent surge in premium pricing. These factors could also be at play:
In recent months, various parts of the United States have experienced major natural disasters, including severe weather. Devastating events like these can result in more claims, which drive up the cost of insurance rates.
Texting and driving don’t mix under any circumstances. As drivers allow themselves to be distracted by smartphones, they cause more accidents; many of which could be deadly. According to a recent National Safety Council report, more than 38,000 people died in 2919 because of traffic accidents.
Because more road accidents lead to higher costs for insurance companies, insurers may raise their rates, passing the increased costs along to customers. That’s also why in some states, getting caught texting or using your phone while driving can increase your insurance premium as much as $321, according to a recent industry report from The Zebra.
While cars are becoming safer thanks to ever-improving technology and design, those very same features make cars more expensive to fix in the event of an accident. As insurance companies have to pay more to repair more expensive vehicles, so do their customers.
According to a study by the Insurance Research Council, up to $7.7 billion in car insurance injury claims filed in 2012 were fraudulent. The more claims an insurance company has to pay, the more the cost of premiums increases.
According to the National Insurance Crime Bureau: “Not only does fraud cause higher insurance premiums for all of us, but it also raises our taxes and inflates prices for consumer goods.”
Tips to keep your auto insurance premiums low
Luckily, there are some easy ways you can keep your car insurance rates reasonable:
The simplest way to lower your auto insurance bill: Stop paying for miles you’re not driving and switch to pay-per-mile insurance — you’ll pay a low monthly base rate plus a few cents per mile when you sign up with Metromile. Because you are paying-per-mile, you’ll have visibility into what your monthly bill is, giving you greater control over what you pay.
Maintain a clean driving record. Staying accident-free on the road may help you score a lower rate.
Keep your credit up. Many insurance companies factor your credit history into your quote, so stay on top of your bills. Bumping your score one tier, like from Good to Excellent, can save you money.
The bottom line
If you’re not happy with the price you pay for car insurance, you might want to consider switching to pay-per-mile car insurance. This is especially true if your driving habits have changed because of the COVID-19 pandemic.
Ride Along is a free app feature that helps you get a more accurate rate before buying auto insurance. Download the Metromile app, and drive for about two weeks. During the trial period, you’ll keep your coverage with your current provider while Metromile considers your actual driving, including how many miles you drive. Once completed, we’ll show you your rate, so you have confidence you’ll save money before you switch to Metromile.