From gas prices to grocery costs, it’s almost impossible not to feel the pinch in your wallet these days. Unfortunately, the trend is the same for auto insurance and other car expenses. Here are five reasons you may see an increase in your auto insurance bill.
Don’t go without auto insurance
It is essential that you maintain vehicle insurance and keep a record of it on your vehicle. It can be tempting to skip insurance because of the cost. But that’s one expense you shouldn’t skimp on if you drive, according to Money Under 30.
The most important reason to carry auto insurance is that it is illegal to go without it in all but two states. There are still fines if law enforcement finds you are uninsured. In fact, in some states, you could even face a permanent suspension of your driver’s license or even jail time. It’s not worth the risk.
In the event of a car accident, you will want car insurance. It doesn’t matter who caused the crash. You still want insurance to handle the expenses. Insurance can also protect your other assets in the event of an accident. Insurance can help prevent the other driver from coming after your car, home and bank account for compensation. Finally, car insurance protects you from liability for the medical expenses of your passengers if you are at fault in an accident.
Buying insurance for your car is more than just a legal thing to do. It’s the smart thing to do. It may be painful to pay that bill, but the peace of mind for you and other drivers is well worth the investment.
All of this means that auto insurance rates can go up. Consider these reasons why you may be paying more and plan accordingly.
1. Inflation is real
According to Erie Insurance, the Consumer Price Index (CPI) has increased more than 7% since 2020. It is the highest it has been in over 40 years. So you’re paying about 7% more on all your bills, including auto insurance, than you were a few years ago.
2. Auto parts are also increasing in price
Inflation is hitting the automotive industry hard. Although the average increase is 7%, auto parts inflation is close to 10%. An increase in auto parts means your insurance will have to pay more to repair your car. Your insurer will likely pass that price increase on to you through an increase in your insurance premiums.
3. Repair costs have increased by 20%
In addition, repairing your car costs even more thanks to supply chain issues and labor shortages. It now costs 20% more to repair your car than it did in 2020. Problems in the supply chain and available labor can also make repairs take longer. This means you may be in rental vehicles longer, putting a strain on your insurance company through the cost of claims.
4. Cars cost more now
Used car prices are up 27% since 2021. And new car prices are up more than 14%. More expensive cars mean higher auto insurance premiums.
5. People are driving more, causing an increase in accidents
People weren’t driving as much in 2020 and 2021 because they stayed home more. This meant less wear and tear on their vehicles and also fewer accidents. Now, more drivers are on the road, leading to more car crashes. Unfortunately, even these accidents are becoming more serious and causing more casualties. Therefore, increased risk causes higher auto insurance premiums.
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