Insurance: Saving Money Despite Increasing Rates

Insurance is a necessary expense in our lives, however it can be costly at times. While consumers are searching for “cheap insurance” and want to save money, the industry is faced with many factors that are increasing auto premiums across the board. Many consumers are asking “Why is my insurance so expensive?” and “How can I find affordable insurance?” Some factors of increasing rates are beyond our control, however there are things you can do to get the best insurance for the best price.

In order to understand how we can save money on our insurance, we first have to understand why rates are going up!

Insurance works by transferring a risk from yourself to an insurance company in return for periodic payments. By paying an insurance company a monthly premium, they then agree to pay for any accidents you are involved in. In order to determine how much you are responsible to pay each month, they use a number of factors to decide how much to charge. Things such as age, gender, marital status, where you live, & vehicle information are all key factors. They will also analyze statistics of similar demographics to determine your likelihood of being involved in an accident.

Here is a look at why auto insurance rates are increasing & why they will continue to rise!

Increased cost to repair vehicles after an accident

Today’s cars are safer than ever which is great news in terms of protecting you and your family. Cars are better built, more reliable, and have more safety features than ever before. The bad news is that the price of cars has gone up incrementally to include these new safety features. The increased cost to cars also means an increase in the cost to repair vehicles after an accident. What may have cost $2,000 to replace a smashed bumper and quarter panel can now exceed $8,000 or more. By the time we repair the bumper, back up cameras, radar units, and other damages, the cost of an accident can be quite expensive.

The average cost to repair a vehicle after an accident is over $6,000

The economy has been recovering steadily since the doldrums of 2008, encouraging people to buy new cars. Used car values are high as well, due to improved reliability and safety, which means there is only a small cost difference between new and used vehicles. The small cost difference encourages more people to buy a new car over a used car, meaning more new cars are on the road. Attractive leasing options also sweeten the pot, promoting new car sales. More new cars on the road means that the average cost of repairs will increase.

Another caveat of an improving economy is higher labor and material costs. As job stability increases and employees are earning more for their time, it means consumers will pay more for their services.

Labor rates are quickly exceeding $80 per hour for auto repairs

Not only are the costs of vehicle repairs soaring, but the cost of medical attention after an accident has nearly doubled, as well. The services necessary to return us to the state we were in prior to the accident have substantially increased. As the cost of services increase, the payout on claims will also continue to soar.

People are driving more than in previous years

People are commuting more than ever before. The census bureau reported that the average American spends more than 30 minutes commuting each way to work. That equals out to over 250 hours spent commuting each year. As the economy has evolved since the market crashed in 2008, some are traveling much farther for work than they would have previously.

More congestion on the roadways equates to a higher number of accidents.

The improved economy has also produced more traffic as many people don’t mind driving long distances. Cars are more comfortable and luxurious, making it easier than ever to drive for extended periods of time.

Fatality rates from auto accidents have increased over 14%

Despite cars and trucks being safer than ever, fatalities resulting from car accidents have increased 14% over previous years. In 2015, there were 35,092 deaths attributed to auto accidents across the United States.

Fatalities are hugely expensive, having prolonged litigation and high payouts.

An increase in auto related deaths can likely be attributed to more drivers on the road than ever before and the increase of those drivers being distracted. While there is no hard evidence available on the specific causes of accidents which lead to death, the presumption is that these risk factors play a large role.

Distracted or impaired driving

There has been a significant increase in distracted driving. Despite recent legislation enacted that makes holding a cell phone while driving a ticketable offense, it has not diminished the number of drivers using their phones while driving. Talking on the phone, texting, and using Google maps all distract drivers. There has also been a large increase in the use of Snapchat, and other apps, while driving. While widely popular, Snapchat poses a major risk to drivers who choose to use it while driving.

70% of people admit to using their cell phone while driving

While many of us know the dangers of using our phones while driving, there are other distracting things that we do in the car. Eating, entertaining children in the back seat, and grabbing items that are out of reach can be a recipe for disaster. Distracted driving can be fatal. Staying engaged while driving drastically reduces your risk of being in an accident.

“My college graduation day should have been a time to celebrate. Instead, my entire world was shattered because of an unnecessary cellphone call. People need to understand the dangers of using a cellphone — handheld or hands-free — while driving. Lives are at risk and poor decisions can have lifelong consequences.”

-Jacy Good, victim of a distracted driving accident

Crumbling infrastructure and roadways

Although the economy has been improving, it isn’t apparent by the state of the roadways in California. Our roads are quickly deteriorating and recent damage caused by storms has only worsened the conditions. 27% of roadways have been deemed substandard in the United States, with 56% of roads in the Bay Area ranked as “poor.”

The infrastructure is crumbling faster than repairs can be made.

Drivers are faced with potholes, poor road surfaces, faded or missing boundary lines, and more. These factors not only increase the risk of an accident occurring, but they can also cause damage not associated with being in an accident. Potholes are an everyday occurrence, however they can cause substantial damage to your vehicle.

So how can you save money on your insurance despite the increasing rates?

NUMBER 1

Be sure to follow all traffic laws and avoid getting pulled over for violations

Although none of us want to get pulled over, we don’t pay as much attention to the rules of the road as we should. Our lives are so busy and that can increase the temptation to speed or run a stop sign. California comes in at number four on the list of “Top Ten States to Issue Driving Citations,” per censes information.

Did you know that 20% of Americans will get a traffic ticket each year?

The average cost of a speeding ticket is $152 which amounts to over SIX BILLION dollars a year in traffic related fines. Not only will you have to pay for the cost of your traffic violation, your insurance premium will likely increase. Even one traffic violation has the potential to raise your rates. By ensuring that you are abiding by local traffic laws, you can help save yourself money along the way.

NUMBER 2

Adopt safe driving habits or attend a defensive driving course

Don’t underestimate the power of safe driving. A good driving record has the potential to save you hundreds on your insurance premium each year. By adopting safe driving habits, you significantly reduce the risk of being in an auto accident. With so much happening in our day-to-day lives, it might be easy to justify sending “just one” text while you drive or to multi-task while in the car. Did you know distracted driving can exponentially increase your risk of being in an accident?

1 out of 4 car accidents in the United States is caused by texting and driving

Many don’t realize how dangerous texting & driving or driving distracted can be until they are involved in an accident. Taking your eyes off of the road for just 5 seconds, your car can potentially travel the length of a football field. In the time that our eyes are off of the road, the potential for an accident goes up by 400%. Saving money isn’t the only reason to avoid a car accident. A car accident can leave your or a family member with lifelong injuries or can be fatal.

By reducing distractions in our cars, we can reduce the likelihood of car accidents. By avoiding an accident, you are saving money on insurance. Each accident causes your premiums to increase, so reducing the number of accidents we are involved in can greatly help with insurance related savings.

NUMBER 3

Bundle your insurance policies to receive a multi-policy discount

By placing your homeowners or renters policy and auto policy with the same agent & company, they will likely give you a discount in return. The multi-policy discount can save you anywhere from 2- 10% of the insurance premium. When combined with other money saving tips, this can save you a significant amount of money.

This money saving tip is a no brainer. Having all of your insurance policies serviced by the same agent will make handling insurance much easier. Also, all that you need to do to get this discount is talk your agent.

NUMBER 4

Meet with your insurance agent often & don’t leave anything out

Meeting with your insurance agent often can potentially save you hundreds of dollars. As an expert in the insurance industry, your agent will know what changes can be made & what discounts you qualify for. Your agent may have a lot of questions, but this is simply to ensure you are getting the best coverage for the best cost. Sometimes details that might seem insignificant can be the ones that save you the most amount of money.

There are discounts available for good drivers and good students, students living away from home, group discounts, or even drivers who drive low miles.

Your local agent can also help save you money based on where you live. We are lucky enough to live on Central Coast, which happens to have lower auto rates than in major urban areas such as San Jose, San Francisco, the East Bay, or Los Angeles – which are often 40% more expensive. Living in the Santa Cruz area has it’s perks!

Be wary of reducing or removing coverage to decrease the cost of your insurance!

The goal of insurance is to transfer the financial risk associated with being in an accident. Without sufficient coverage, you may not have coverage at the time of an incident. We all want to get the best price on our insurance, but will the best price really be the best coverage?

Even the lowest priced insurance policy could leave you overpaying if you don’t have adequate coverage.

While it might save you twenty or thirty dollars a month to increase your deductibles or remove coverage, it could end up costing you thousands of dollars if you were in an accident. If you don’t have adequate coverage at the time of an accident, you will be responsible to pay for all of the damages to your vehicle, which can be costly.

We want to provide you with affordable coverage without compromise

Our goal is to add value to your auto insurance coverage! We offer a thorough review of your needs and coverage options. We want to make sure you are receiving the best coverage for the best price. You should feel confident in your insurance and your agent. We will be your insurance advocates to guarantee you are receiving all available discounts & necessary coverages. Insurance is meant to protect your financial future and we are here to help!