How could a recession affect your car insurance? Recession, Labor shortage, Supply chain issues. Inflation. These terms have been going around for a couple of years now. And economically, things are getting worse every day. Experts predict that there might be a recession in the USA in the future. This means increased unemployment, higher levels of inflation, and very low availability. But how does the recession impact car insurance? Are there ways to save money on car insurance during the economic recession?
In this guide, we will help you understand how a recession could impact your car insurance. Also, shows you how drivers pay less for auto insurance during this period. Read on to understand.
How a Recession Could Impact Your Car Insurance
Just so you know, every recession is different. This means that with each economic turmoil, you may face different issues with your car insurance. Unfortunately, this always translates to very high rates, and drivers may need to reassess their coverage limits.
Recessions could mean high car insurance rates
Auto insurance rates have been going up for a while, and it doesn’t seem like 2024 will break the trend. Kenneth Chavis IV from Versant Capital Management says inflation plays a big part in this. Everything costs more, including fixing cars and getting new ones. Tim Grant from LexisNexis agrees, saying we’re paying more for everything, including insurance.
So, even though inflation has slowed down recently, don’t expect your car insurance to get cheaper anytime soon. Insurers can’t just raise rates whenever they want; they need approval from the state. And even if they do get approval, it takes time for the new rates to kick in, sometimes up to a year. So, brace yourself for more rate hikes in 2024, even if inflation calms down.
Recession might prompt you to shop around
Car insurance prices are going up, but not all companies charge the same. Rates also differ by state, so knowing the average rates where you live can help you see if your price is fair. Checking prices with different companies can help you find lower rates, and many people are doing just that.
According to LexisNexis data, there’s been a big jump in people shopping for car insurance in January each year since 2021. This might be because people are budgeting for the New Year. Although fewer people were shopping for insurance in the third quarter of 2023 compared to the fourth quarter, as budgets tighten, we might see more people looking for deals in 2024.
Recession might leave you underinsured
If you’re feeling the pinch of a recession, cutting corners on your insurance might seem like a quick fix to save money. But think twice before slashing your coverage. Sure, lower limits might make your premium cheaper. But if you end up in an accident, you could face hefty out-of-pocket costs. It’s a risky gamble that could hurt your finances more in the long run.
With inflation on the rise, insurance costs are climbing too. But here’s the kicker: unless you’ve manually adjusted your policy, your coverage stays the same. That means your insurance might not stretch as far as it used to when it comes to covering accident expenses. You could be left underinsured without even realizing it.
It’s worth chatting with your insurance agent or company rep to review your coverage. If you’re worried about being caught short due to inflation, bumping up your coverage could give you extra financial protection. And hey, while you’re at it, see if there are any discounts or better deals out there to help balance the cost.
How Drivers Pay Less for Car Insurance During Recessions
If you have seen your auto insurance rates increase because of inflation, Or you just want to find some room in your budget because of the recession; you might want to find ways to lower your premium. Car insurance premiums are partially within your control. Below are some of the ways drivers pay less for auto insurance during recessions.
Drop Add-ons
Between 2006 and 2010, when the economy took a hit, folks with older cars often decided to ditch collision and comprehensive coverage. These coverages pay for stuff like repairs from accidents, theft, or vandalism. The number of older cars without these coverages went up from 53% to 63%, saving people about $19 a month or $229 a year.
Sounds good, right? But here’s the catch: if something bad happened like their car got stolen or damaged, they’d be stuck with the bill because they dropped their coverage. And even though they saved money upfront, if they did have an accident, the costs might end up being way more than what they saved on insurance.
Shop around
Top car insurance companies use different ways to set their prices, so the same coverage might be cheaper with one company than another. It’s worth shopping around and getting quotes from different companies to find the best deal for you.
Discounts
Many insurance companies give discounts to help you lower your car insurance cost. You might get a discount if you bundle your policies with one company, choose paperless billing, or pay your premium all at once.
Make use of telematic devices
With telematics discounts, either a plug-in gadget or a phone app checks how you drive. If it shows you’re a safe driver overall, you might snag a discount.
Claims
Another way to cut costs on car insurance, whether times are tough or not, is to handle repairs yourself instead of making a claim. It might be cheaper in the long run to foot the bill rather than tell your insurance company about it. Why? Because they’re likely to bump up your premium if you file a claim. By holding off on claims, especially during a financial downturn, you could keep your rates from going up. But remember, this only works if you’ve got the cash to cover repairs yourself.
Whether or not the U.S. economy hits a recession label isn’t the main concern for regular families. Inflation has already eaten into what they can spend and pushed up car insurance prices. While hunting for cheaper insurance is smart, cutting coverage won’t save a lot and could put you at greater financial risk. Inflation’s got a tight hold on many Americans, but keeping your car insurance intact could help you ride out this bumpy ride without getting hurt.