Thanks to inflation, you’re probably paying more for just about everything these days, and car insurance is no exception. Insurers have raised rates an average of 8.3% so far this year, according to data from S&P Global Market Intelligence, and costs to consumers are likely to continue to rise, analysts at Bankrate said.
For insurers, price increases make sense: rising claims costs mean insurance companies need to collect more from their customers to keep up. But for drivers, that means paying higher premiums for the same coverage.
Depending on your policy, that could be a big deal, says Cate Deventer, managing editor and managing editor at Bankrate. “Rising costs mean your coverage may not go as far as it used to,” she says. “Several million people could be underinsured.”
Here’s why insurance experts say you may not have enough cover and why it’s worth reviewing your current policy to make sure you won’t have to pay out of pocket in the event of an accident. .
Why Your Car Policy May Not Provide Enough Coverage
The first step to making sure you are well covered is to understand how your current policy works. “People buy a policy and pay the bill every month without checking what they actually have,” says Deventer.
Your policy may include comprehensive and collision coverage, which covers different types of damage to your vehicle, as well as other coverages that pay your medical bills in the event of an accident.
The key coverage to focus on, however, is liability coverage, Deventer says. If you are found guilty of an accident, this covers damage to property or other vehicles, as well as other drivers’ medical bills and legal action you may face.
In the event of an accident, your insurance will pay up to a maximum amount specified in your policy. If the damage exceeds the amount your insurer will pay, you could end up with the difference.
And the costs associated with car accident insurance claims are on the rise. The price of automotive parts, for example, has risen 13.4% over the past year, according to the Federal Reserve Bank of St. Louis.
The cars themselves have also become more complex, says Deventer. “A crash that was once a gash in the bumper could now damage the cameras or sensors.”
Then there are the medical costs. In 2020, auto insurers paid an average of $20,235 for bodily injury claims resulting from car accidents, according to the Insurance Information Institute. But over the past 12 months, the price of health care has risen 5.6%, according to the Bureau of Labor Statistics.
This is a concern, especially if you have state minimum auto coverage. A handful of states only require your policy to cover $15,000 or $20,000 in medical expenses per person in the event of an accident, and Floridians are not required to carry medical liability insurance at all.
This means that even an average medical claim could be thousands of dollars more than your policy covers, and one particularly costly accident could be financially crippling.
You don’t have to pay much more for better coverage
If your premiums are already rising, you may not be keen on paying even more to make sure you’re properly covered. Fortunately, this can be relatively inexpensive.
On average, a full-coverage auto policy with minimal liability coverage will cost you $135 per month, according to Bankrate. Increase your liability coverage to the $50,000/100,000/$50,000 model (i.e. $50,000 per person for medical expenses, up to $100,000 total per accident and $50,000 for property damage), and you’ll pay $142 on average, or $7 per month.
While some insurance companies may let you change your coverage on their website or mobile app, others will require you to speak to an agent, which is a good idea anyway, Deventer says. “They will be able to understand your specific needs,” she says.
If you find it will be expensive to increase your coverage, start by asking your agent what common discounts — such as those for safe drivers or paperless accounts — may apply to you. You can also find more robust coverage at a better rate by switching insurers.
“It’s more important than ever to re-shop around to find a rate and policy that works best for you,” says Pat Howard, editor and chartered P&C insurance expert at Policygenius. “It’s best to consult an independent agent who is unbiased and can find you the best rate.”
If you plan to continue with lower premiums and coverage that may not be up to par in the event of an accident, remember that your policy is there to protect you from possible financial disaster.
“Paying more isn’t fun, but it’s a really important time to do it,” Deventer says. “Insurance is designed to protect your finances. If you have an accident, your financial health is protected.”
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