Over recent years, car owners have had to grapple with the harsh reality of increasing insurance costs. In 2024, rates skyrocketed by 15%, according to a review by Insurify Insurance Agency, which derived statistics from over 90 million car insurance quotes. And projections suggest there will be a further hike of 5% this year. Fortunately, there are ways you can mitigate high insurance costs.
An effective cost-cutting measure is discontinuing comprehensive or collision insurance, potentially saving you hundreds of dollars annually. It is, however, essential to first analyse the necessity of such coverage in your specific situation. These escalation in prices is attributable to a variety of factors. Heightened repair costs, prevalent climate disasters, and an increased number of uninsured drivers substantially contribute to these rising premiums. This accumulation of factors has caused auto insurance companies to up their prices to keep up with expenses caused by claims.
Breaking down costs further, Seth Hirschhorn, principal and advisor at World Insurance Associates, explains “A few examples are the increase in technology in vehicles… any ‘small’ accident that damages cameras, sensors, and similar aspects of a car can cost thousands of dollars to fix, not just a few hundred dollars to repair.” Ensuring a comprehensive policy coverage can therefore be financially draining.
An annual average cost of $1,165 is linked to comprehensive and collision coverage, which are not required by law in most states. Considering whether to keep these coverage types if your vehicle is fully paid-off can often be influenced by the existing condition of the vehicle and one's financial capacity.
Dan Babb, a State Farm agent, advices to "Consider the statistics of the vehicle and your financial situation as a driver". He suggests considering factors like the vehicle's mileage, the cost of replacement versus the cost of coverage, and the potential for unexpected events such as a tree falling on the car or hitting a deer.
Notably, it's not mandatory to purchase comprehensive and collision coverage as a package - they can be bought separately, particularly if the vehicle loan is fully paid off. Importantly, insurers only cover your car’s actual cash value in the event of a total loss and do not cover replacement costs.
Despite rising premiums, there are tangible steps that can be taken to alleviate the financial burden, such as dropping comprehensive or collision coverage for paid-off loans, evaluating the actual necessity of these coverage types based on your vehicle's value, assess the affordability of potential damages, and reconsider the money you spend on your current coverage options.