Auto insurance premiums surged 20.3% in December 2023 compared to a year ago, Labor Department data showed.
That was the biggest jump since 1976, according to reports, and drivers will face more of the same in 2024. ValuePenguin.com expects insurers to raise auto insurance premiums by an average of 12.6%.
Why it matters: Any meager savings drivers find at the fuel pump are going right to insurance premiums. Auto insurance coverage outpaced the inflation rate, rising six times faster than consumer prices last year.
With the expected rate hikes, ValuePenguin projects that the average annual cost of auto insurance will hit $1,984 in 2024.
By the numbers: Drivers in Michigan are paying the highest rates in the U.S., with an average annual premium of $4,632, according to ValuePenguin. The state has high Personal Injury Protection coverage requirements.
Florida comes in second at $2,988 annually, followed by Nevada with a $2,964 average yearly rate.
- Maine, New Hampshire, and Idaho drivers will likely see the lowest auto premium prices.
Driving the rate hikes: Several factors are driving up the cost of car insurance.
- Economic inflation continues to drive up the cost of computer components and other parts required for repairs.
- A mechanics shortage means it takes longer to fix vehicles. That raises costs for insurance companies, who must spend more on car rentals for customers.
- Weather damage in 2023 also contributed to higher repair costs. Hail is an especially costly event.
- Car theft rates have climbed since 2022, with a 2% increase in the first half of 2023. Kia and Hyundai models have prime targets due to a vulnerability that makes them easy to steal. In addition, catalytic converter thefts remain an issue, although they have decreased since 2022.
What we’re watching: As auto insurance burdens become increasingly challenging for Americans, 54% of policyholders told ValuePenguin that they struggle to afford coverage.
So, how can you save on auto insurance this year? We hear about it all the time on insurance ads, the bundle. Have the same provider cover auto and homeowners or renters insurance when possible. Ask about other discounts for safe drivers, students, and more.
If you can afford it, increase your deductible, the amount you’re paying before your insurance company pays. Typically, a higher deductible equates to a lower premium.
Consider if you need full coverage. If you own an older vehicle, carrying liability, collision, and comprehensive coverage may not justify the added cost. Working with a trusted insurance advisor who understands the market to see what’s best for your situation.
