Another inflation pressure point for Americans: Car insurance
Inflation may be starting to ease, but drivers won’t see a break on their insurance this year, with the average cost of a policy rising almost 14%, according to a new analysis.
The price of full coverage car insurance jumped to $2,014 a year in January, up 13.7% from a year earlier, according to a Bankrate study. Drivers in some cities — including Orlando, Tampa and Miami — are paying about $3,000 this year for coverage, Bankrate said.
The higher insurance costs come as car buyers are facing higher interest rates on auto loans, while car prices have also inched higher. The typical monthly payment for a new car is now $717, 37% higher than five years ago, according to Edmunds.
Rates could climb even higher, depending on how inflation impacts the economy, said Bankrate analyst Cate Deventer.
“Car insurance is a really important part of your financial health,” she told CBS MoneyWatch. “If you know your rate is going to be higher, even if nothing changes in your coverage, you can prepare your budget for that a little bit better.”
Who pays the most
The Bankrate study examined the nation’s 25 largest cities to determine where drivers pay the most in car insurance, as a share of their annual income. It found that motorists in Boston and Seattle pay the least, at around 1.3% and 1.4%, respectively. Drivers in Miami and Tampa, Florida, face the steepest car insurance costs, at 5.5% and 5.2% of their earnings, respectively, according to Bankrate.
In general, a driver’s car insurance rate is based on the age and make of the vehicle, the person’s driving record, city of residence and other factors. Bankrate also found that adding a teenager to the policy, getting a speeding ticket and being convicted of drunk driving often raises car insurance costs.
One reason car insurance in Florida is relatively higher: drivers are required to buy no-fault insurance. Auto insurers charge more for those policies because they view no-fault as riskier, since they must pay for a claim no matter who caused the car damage.
Another reason Florida is pricey: Interstate 4, which connects Tampa to Orlando, is one of the deadliest routes in the nation, according to AAA and highway safety experts. Florida is a high-population state where tourists are often driving vehicles, which also plays a role in the state’s rates, Deventer said.
Some of the cheapest full coverage prices are in Boston ($1,328), Seattle ($1,361), Washington, D.C. ($1,711), Portland ($1,458) and Charlotte ($1,484), Bankrate found. Rates are probably lower in those cities because auto insurers view them as having fewer crashes, fewer teen drivers on the road and fewer drunk driving accidents, Deventer said.
Atlanta, Baltimore, New York, Philadelphia and Seattle saw the steepest auto insurance price drops year over year, Bankrate said, while Chicago, Orlando, Phoenix, San Diego and San Francisco had the sharpest increases.