Auto insurance rates have soared recently, and California drivers feel the pinch in their pocketbooks.
The average annual cost for full coverage for a Golden State driver with a clean record and a $1,000 deductible reached $2,417 in June. Insurance comparison firm Insurify predicts costs will jump another 11% to $2,681 by the year’s end.
Driving the news: Auto insurance prices have been rising for several reasons.
- Overall, vehicles are more expensive. While prices fluctuate depending on market conditions, the average cost of new cars is now well over $40,000.
- Car repairs are pricer partly because the technology inside vehicles has grown more complex.
- Theft is up, particularly thefts of catalytic converters.
- Lastly, insurers are still adjusting to post-pandemic conditions.
“During Covid-19 shutdowns, states like California put a freeze on rate increases,” Insurify director of sales and service Mallory Mooney said. “That’s why so many people saw drastic rate hikes in 2023 after those restrictions were lifted. Insurers are still playing catch-up, and it’s too little too late for a lot of them.”
Drivers shift gears: Drivers are no longer just accepting higher car insurance premiums. They’re changing insurers and policies.
According to research firm J.D. Power, half of U.S. auto-insurance customers have actively shopped for a new policy in the past year, up from 41% in 2021.
Meanwhile, the WSJ reports that drivers are increasing their deductibles to help lower their payments. Many are also switching to pay-per-mile insurance plans, where they pay partly based on how many miles they drive or don’t drive.
- For example, if you pay a base monthly rate of $40 and 6 cents for each mile driven, you will pay $64 that month if you drive 400 miles.
What we’re watching: While premiums have been rapidly rising, California is not one of the ten most expensive states for car insurance. Maryland is number one, with an average full-coverage rate of $3,400 annually.
If economic inflation dissipates, it will go a long way in stabilizing prices that impact auto insurance premiums.
Working with a trusted advisor
The impact of increasing insurance premiums can be concerning. Working with a trusted independent insurance advisor can help as they can shop different insurers, look for possible discounts, and find the right deductible mix on your behalf.
Premier Private Client advisors work with our customers to find the right balance of coverage and deductibles to meet their unique needs. Contact us today to learn how we can help you counteract rising insurance rates.
