Thanks to inflationYou probably pay more for just about everything these days, and car insurance is no exception. Insurers have increased rates by an average of 4.9% 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 say.
For insurers, the higher prices make sense: the increasing cost of paying claims means that insurers need to get more of their customers to keep up. But for drivers, it means paying higher premiums for the same coverage.
Depending on your policy, this can be a big problem, says Kate Deventer, insurance writer and editor at Bankrate. “Higher costs mean your coverage may not reach the extent it used to be,” she says. “Several million people may be underinsured.”
Here’s why insurance experts say you may not have enough coverage, and why it’s worth checking your current policy to make sure you won’t have to pay out of pocket in the event of an accident.
The first step toward making sure you have adequate coverage is to understand how your current policy works. “People buy a policy and pay the bill every month without checking what they already have,” Deventer says.
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.
Deventer says the main coverage to focus on is liability coverage. If you are found to be at fault in an accident, this covers damage to property or other vehicles, as well as other drivers’ medical expenses and any lawsuits you may face.
In the event of an accident, your insurance will pay the maximum amount specified on your policy. If the damages exceed the amount your insurance company will pay, you could end up on the hook for the difference.
The costs associated with car accident insurance claims are on the rise. For example, the price of auto parts increased by 13.4% last year, According to the Federal Reserve Bank of St. Louis.
Deventer says the cars themselves are getting more sophisticated, too. “An accident that used to be a bumper dent can now damage the cameras or sensors.”
Then there are the medical bills. In 2020, auto insurance companies paid an average of $20,235 for bodily injury claims from auto accidents, According to the Insurance Information Institute. But in the past 12 months, the price of health care rose 5.6%, According to the Bureau of Labor Statistics.
This is a concern, especially if you have automatic minimum coverage. Only a handful of states require your policy to cover $15,000 or $20,000 in medical expenses per person in the event of an accident, and Florida residents are not required to purchase medical liability coverage at all.
This means that even an average medical claim can be thousands more than your policy coverage, and a particularly expensive accident can be financially crippling.
If your premiums are already going up, you may not be excited about the prospect of paying more to make sure you’re covered properly. Fortunately, doing so can be relatively inexpensive.
On average, a full coverage auto policy with minimum state liability coverage will save you $135 per month, According to Bankrate. Increase your liability coverage to Form $50,000/100,000/50,000 (i.e. $50,000 per person for medical bills, up to $100,000 per accident, and $50,000 for property damage), and you’ll pay $142 on average – $7 per month bump.
While some insurance companies may allow you to fiddle with your coverage on their website or mobile app, others will require you to speak with an agent, which is a good idea anyway, Deventer says. “They will be able to understand your specific needs,” she says.
If you find that increasing your coverage would be costly, start by asking your agent about common deductions—such as those for safe drivers or paperless accounts—that might apply to you. You may also find stronger coverage at a better rate by switching insurance companies.
“Now it’s more important than ever to re-shop to find a rate and policy that works best for you,” says Pat Howard, managing editor and licensed property and casualty insurance expert at PolicyGenius. “It is best to consult with an independent agent who is unbiased and can find you the best price.”
If you’re considering going ahead with lower premiums and coverage that might not end up snuff in the event of an accident, remember that your policy is there to protect you from potential 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 money. If you have an accident, your financial health is protected.”
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