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Inflation-Proof Your Auto Insurance: Tips and Tricks

When inflation occurs, each of your dollars buys fewer goods and services than it did before. This means that your purchasing power decreases as prices rise. According to the U.S. Inflation calculator, 2021 had a record-high inflation rate of 8%, with 2023 currently at 3.7

Inflation impacts the U.S. economy in several ways, such as reducing income, changing how and what we buy, and even causing an increase in interest rates, which can affect financial decisions. Economic inflation can also impact auto insurance premiums. Increasing healthcare expenses, vehicle repair costs, and accident rates can cause insurance premiums to rise, causing significant financial strain on customers.

Inflation’s Impact on Auto Insurance 

Various factors contribute to auto insurance premium price hikes, such as:

  • Advanced vehicle technology: The average cost of vehicle repairs has steadily risen in recent years. Safety features and advanced technology in newer cars mean a higher cost to repair.
  • Higher medical costs associated with accident injuries: Insurance companies face higher payouts for total loss claims due to rising healthcare costs.
  • Increased vehicle values: Premiums rise as the cost of vehicles increases. 

All of this means more of a financial burden on the insurer, which is then passed on to the policyholder, causing financial strain for many.

Protecting Your Finances in the Face of Inflation 

As a consumer in the U.S., you want to protect your finances as much as possible when the economy is experiencing inflation. There are many ways to do this with your auto insurance, including discounts and bundling options, regular policy reviews, and maintaining a good driving record. 

Discounts and Bundling Options 

It is possible to reduce premium costs by taking advantage of auto insurance discounts. Some common discounts include: 

  • Good or Safe Driver: Drivers with a clean driving record, free of accidents or traffic violations, qualify for a Safe Driver Discount. 
  • Multi-Vehicle Discount: If you have multiple cars in your household, insuring them all on the same policy could earn you a multi-vehicle discount.
  • Good Student Discount: Some insurers will offer a good student discount to college students with a good GPA. 
  • Multi-Policy Discount: Having more than one policy with the same insurer will often provide a discount. You can often bundle your home and auto, auto and life, or any combination of qualifying policies.

The advantages of bundling policies include convenience, cost savings, and the ability to manage multiple policies under one insurance provider. As a result, customer loyalty increases, and claims are processed more efficiently. Bundling auto and home insurance allows you to simplify your finances (one company to pay for insurance) while also benefiting from significant discounts.

Regular Policy Reviews 

Reviewing your policies is crucial to ensuring you have the proper coverage and receive the best price. Often, people do upgrades to their homes or purchase a new vehicle and forget to call the insurance company. 

When you do a policy review, consider these items:

  • Coverage limits: Ensure you have enough coverage for the items you are insuring. 
  • Deductibles: Since you have to pay out of pocket, consider your deductibles to ensure you can afford them. Also, a higher deductible means less premium. 
  • Discount eligibility: Always check that you are getting any available discounts you qualify for. 
  • Life changes: Situations such as getting married, having kids, moving, and even starting a new job could impact your auto policy. 
  • Claims history: Check your claims history for accuracy.

Reviewing your policies regularly will help to minimize gaps in coverage and ensure you are getting the most out of your policy.

Maintaining a Good Driving Record 

You can achieve lower insurance premiums by maintaining a clean driving record. Insurers view drivers with clean records as less likely to be involved in accidents, reducing their chance of paying a claim. This translates to lower premiums for you.

Traffic violations, such as speeding tickets and at-fault accidents, can increase substantial premiums due to the insurer’s increased risk. The more money they think they may have to pay for you, the more they will charge. 

Try to maintain a clean record and keep lower premiums by following all traffic laws. Don’t speed; always fully stop at stop signs and red lights. Be a defensive driver, keeping aware of others and any hazards on the road. Don’t drive distracted; Turn notifications off on your phone and try not to mess with technology. 

The Importance of Being Proactive 

Inflation-proofing your auto insurance policy can help you maintain affordable coverage. To mitigate rising premiums, you can review your policy regularly, adjust coverage limits, increase deductibles, and take advantage of discounts. 

While some cost increases cannot be avoided, following these tips can help keep your costs low. In addition, prepare for inflation by maintaining a savings account for expenses you may not be prepared for otherwise. 

Find an auto insurance policy that meets your needs.

Get a quote

Find an auto insurance policy that meets your needs.

Get a quote