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As car insurance premiums skyrocket, more and more drivers are opting to drop their policies. Saving hundreds of dollars in premiums per month sounds appealing, but from a financial—and legal—perspective, that risky decision could have serious consequences.
The cost of a typical motor vehicle insurance policy hit an all-time high of $742.29 in September, according to the Bureau of Labor Statistics. That’s up 19% from a year ago and more than 35% from the same month in 2020.
Drivers in some parts of the country are seeing their rates jump by double-digit percentages this year alone.
In the first half of 2023, the number of uninsured drivers grew by 30% in a dozen states, according to a recent J.D. Power survey. Among people whose households have at least one vehicle, 5.7% said they no longer have car insurance, up from 5.3% in late 2022, it found.
“It’s increasingly difficult for consumers to find lower premiums” so “they’re increasingly driving without auto insurance now,” says the report’s author, Stephen Crewdson, senior director, global insurance intelligence at J.D. Power.
But even if you’re battling higher car insurance costs, experts warn that dropping your coverage entirely could end up costing you even more.
Why Should You Avoid Driving Without Car Insurance?
For starters, driving without a minimum level of insurance is illegal in all but two states, New Hampshire and Virginia.
In New Hampshire, drivers can bypass buying car insurance if they can show they have enough money to meet the state’s financial responsibility requirements in the event that they’re found to be at fault in a crash. In Virginia, drivers can pay a $500 uninsured motor vehicle fee to skip insurance. But they will be personally liable if involved in an accident.
Anywhere else in the U.S., if you’re caught driving without the proper insurance, you could face penalties that include hundreds or thousands of dollars in fines, the suspension of your license or registration, the impounding of your vehicle or even jail time.
Regardless of your state’s rules, if you drive without car insurance and are involved in a crash that causes injuries or property damage, you could be on the hook for costs that might devastate you financially. In some states, the victims could sue you.
What’s Driving Up Auto Insurance Rates
Rising inflation and a bump in accident and theft claims are among the factors causing car insurance premiums to surge, according to a new Insurance Information Institute study.
As pandemic-related supply chain snags linger, auto repairs are taking longer and auto parts are costing more, particularly when car features are high-tech.
The price tag for new and used vehicles has also ballooned. The average price for a new vehicle was $48,451 in August. That’s up $42 from a year ago and more than $5,000 higher than two years ago, when the average was $43,355, according to Kelley Blue Book. This means insurers are having to cover vehicles that cost more to replace.
And claims for both car damage and medical bills are higher, too. This is the second year in a row that auto insurers are operating at a deficit, largely due to more expensive claims, according to J.D. Power.
Crewdson says your zip code is also a factor in your auto insurance premium because companies will raise rates in areas where they have seen a spike in claims. Vehicle theft has risen 2% from last year, with nearly half a million vehicles reported stolen from January to July 2023, according to a National Insurance Crime Bureau report released on October 11.
“So if you live in a zip code where claims are more frequent or more severe than they were in the past, your premium may reflect that,” says Crewdson.
That’s what happened to Diane Bond in Jacksonville, Florida. Bond says State Farm increased her insurance premium 62% in the last year, citing her zip code.
“I’ve never had a ticket, never filed a claim. So there’s no reason for it to increase 62% in one year,” says Bond. “You’d think as the car gets older and it’s less valuable, the insurance would go down, but no.”
Bond canceled her auto insurance with State Farm in September and went with USAA instead.
Know Before You Go: How to Bring Down Auto Insurance Costs
It is possible to lower your rising auto premiums while still remaining insured. Here are some ways you might be able to bring your costs down with your current insurance carrier or a new company:
- Shop around. Get auto insurance quotes from other providers.
- Bundle coverage. Insurers will sometimes lower your total premium costs if you bundle insurance policies. For example, Allstate offers up to 25% savings if customers bundle their auto and home plans. You can ask your current insurer about bundling or see whether a new insurer will give you a break if you’re willing to bring over all of your business.
- Ask about special discounts. Insurers typically offer some kind of car insurance discount or special deal that may vary by company. For example, they might provide a discount for being a student with good grades or a member of a credit union. Some give customers discounts for signing up through a phone app or seeking an insurance quote online instead of in person.
- Lower your miles. One measure that determines your insurance cost is how far you drive. In general, the less you drive, the less risk you face on the road, and the lower risk might be reflected in your premium. Call your insurer to see whether the estimated mileage in your policy needs to be adjusted lower. This is a likely option as more Americans are working from home.
- Track your driving. Many insurers will offer a discount if you agree to install a software program that tracks your driving and reports results back to the insurance company. For example, USAA offers a 10% discount for customers who enroll in its tracking app program, and then there’s you can get a discount of up to 30% based on your driving results. Of course, this only benefits you if you’re a good driver.
- Negotiate your coverage. Ask about changes you can make to your policy to reduce your premium, such as lowering the coverage limits or deductibles. This might mean that you take on more of the cost if there is an accident. But that’s often better than being uninsured.
Best Car Insurance Companies 2023
With so many choices for car insurance companies, it can be hard to know where to start to find the right car insurance. We’ve evaluated insurers to find the best car insurance companies, so you don’t have to.