Insurance Costs up With Economy Down
The last thing that consumers entwined in a recessionary economy need is an increase in insurance rates, but that’s just what they were confronted with in 2008. According to RateWatch, 2008 marked the biggest jump in car insurance rates in five years, with an annual increase of 8 percent over 2007. Overall, car insurance rates rose from an average of $1,810 annually at the end of 2007 to $1,954 in 2008. RateWatch is based on real-time auto insurance quotes from more than a dozen insurance businesses at Insurance.com.
“The rate increases throughout 2008 were ill-timed for consumers, who are struggling to pay bills or are facing serious financial difficulties,” said Sam Belden, vice president of strategic alliances at Insurance.com. “We’ve seen an alarming number of customers seeking to reinstate policies that had lapsed due to financial hardships.”
Belden fears that we are at the beginning of a worrisome cycle when it comes to auto insurance, as declining credit scores and bankruptcy filings make it much more expensive for drivers to get coverage and harder to find an insurer willing to cover them. Many insurers use credit information to determine a driver’s insurance risk score, which is used to help set insurance rates. Consumers with a history of being late on credit card bills or of opening and closing bank or credit accounts are more likely to pay higher insurance premiums. Consumers facing personal bankruptcy will face a significant impact on their credit rating and may be considered high-risk for future insurance coverage.
What should you do to keep your car insurance rates down? First, protect your credit. While one late payment won’t cause big problems, a pattern of missed payments will change your insurance risk score as well as your ability to get credit in the future. If you are having trouble paying the minimum amount due on a credit card bill, car loan, mortgage payment or student loan, call your lender before the due date to explain the situation. Most lenders will work with you to explore payment options. Being proactive will help you protect and preserve your credit rating.
While it might seem tempting in times of financial crisis, don’t let your car insurance lapse. Driving without insurance is against the law, and not only can it result in costly fines, it also can end up costing drivers with lapsed policies thousands of dollars when they go to get car insurance again. Having a lapsed policy -- caused by not paying a bill on time or allowing a gap between a current policy and a new policy -- can be a red flag for insurance companies. Call your carrier to explore monthly installment options and to make sure you’re getting all of the discounts you’re entitled to.
Finally, if your current insurance is too expensive for you, shop for a new policy. Compare several companies to make sure you get the coverage you need at the right price because the potential for savings is significant. According to an Insurance.com study, customers saved an average of $595 when they shopped on its site and switched carriers.