10 Reasons Why Car Insurance Premiums Are Skyrocketing

According to recent figures from the U.S. Bureau of Labor Statistics, car insurance premiums have risen 17% nationwide over the past year.

So, if you feel like you are paying too much for car insurance, you're not alone. Here are a few reasons the cost of auto insurance is soaring.

Inflation has caused the cost of just about everything to rise. Those rising costs find their way into your car insurance premiums.

Many of the issues you'll see on this list are contributing to higher costs throughout the economy. Even something as seemingly good as higher wages for auto mechanics helps to drive up your car insurance costs.

As higher costs everywhere add up, insurers have little choice but to pass them on to customers. That makes it more difficult for policyholders to get ahead financially.

In recent years, issues with semiconductors and other supply chain woes have made it more difficult to get cars to market. That lack of new inventory has helped to push car prices higher.

In fact, there's only one new car in the U.S. market, the Mitsubishi Mirage, with a starting price of less than $20,000.

An expensive car is costly to fix or replace, and car insurance premiums have risen to reflect that change.

Dramatic weather events many experts link to climate change can cause more damage to cars, leading to a rise in claims.

Hurricanes, flooding, tornadoes, and other extreme weather events put cars at a higher risk of being damaged. Higher risks mean insurance companies raise the cost to cover such events.

Reinsurers protect insurance companies. In essence, they provide insurance to insurers. Unfortunately, reinsurance rates have been rising to cover the cost of rising claims.

As your insurance company’s reinsurance rates rise, it might try to recoup these costs through higher insurance premiums.

The COVID-19 pandemic temporarily pushed many drivers off the roads and into work-from-home setups.

But as workers have returned to the nation’s highways, accidents have increased. More accidents means a greater number of claims — and higher insurance rates.

There's a push in America to protect the environment by moving more people into electric vehicles.

However, EVs have some downsides. The vehicles are more complex, making them more expensive to repair. Insurance companies recoup those higher repair costs through bigger premiums.

Today’s drivers often choose bigger SUVs or trucks instead of sedans. The top three best-selling vehicles in the U.S. last year were pickup trucks, according to Car and Driver.

Bigger vehicles can be more expensive to fix and may cause more damaging accidents. Those factors help contribute to increased insurance costs.

As the supply of used cars has dried up, the inventory remaining on car lots has gotten more expensive. The cost of used cars can sometimes even rival the price of a new vehicle.

With the value of used cars soaring, insurance premiums assigned to them also are climbing.

Cars are becoming more advanced every day. This includes the advent of navigation features, heads-up displays, phone connectivity, additional airbags, and other safety features.

However, those advanced features also cost more money to replace if you’re in an accident. As a result, insurance companies must increase premiums to cover these features.

It’s not just the price of a car that's increased in recent years due to inflation. The cost of parts and labor has also risen, which means getting parts and fixing your vehicle is more expensive than it used to be.

Insurance companies have to cover those extra costs, so they raise rates in anticipation of any repairs. That reality is another reason why today’s car owners are finding it more difficult to keep more money in the bank.

Buying a new or used car can be frustrating once you factor in additional rising costs such as gas, maintenance, or insurance.

Before you buy your next vehicle, shop around to find the best car insurance options at an affordable price. Doing so can help you avoid wasting money during these trying times.