Several million people may not have enough

Thanks to inflation, you’re likely paying more for just about everything these days, and car insurance is no exception. Insurers have increased rates by an average of 4.9% so far this year, according to data from S&P Global Market Intelligence, and costs for consumers will likely continue rising, say analysts at Bankrate.

For insurers, the price hikes make sense: The rising cost to pay out claims means insurance companies need to take in more from their customers to keep up. But for drivers, it means paying higher premiums for the same coverage.

Depending on your policy, that could be a big problem, says Cate Deventer, insurance writer and editor at Bankrate. “Rising costs mean that your coverage may not go as far as it used to,” she says. “Several million people might be underinsured.”

Here’s why insurance experts say you might not have enough coverage, and why it’s worth examining your current policy to make sure you won’t have to pay out of pocket in case of an accident.

Why your auto policy may not provide enough coverage

The first step towards making sure you’re adequately covered is understanding how your current policy works. “People buy a policy and pay the bill every month without checking what they actually have,” says Deventer.

Your policy may include comprehensive and collision coverage, which covers different types of damage to your vehicle, as well as other coverages that pay your medical bills in case of an accident.

The key coverage to focus on, though, is liability coverage, says Deventer. If you’re found to be at fault in an accident, this covers damage to property or other vehicles, as well as medical expenses for other drivers and any lawsuits you may face.

In the case of an accident, your insurance will pay up to a maximum amount specified in your policy. If the damages exceed the amount your insurer will pay out, you could end up on the hook for the difference.

And the costs associated with car accident insurance claims are on the rise. The price for motor vehicle parts, for instance, has risen 13.4% in the past year, according to the Federal Reserve Bank of St. Louis.

Cars themselves have gotten more intricate, too, Deventer says. “An accident that used to be a dent in the bumper could now be damage to cameras or sensors.”

Then there’s medical bills. In 2020, auto insurers paid out an average of $20,235 for bodily injury claims from car accidents, per the Insurance Information Institute. But in the last 12 months, the price of health care has gone up 5.6%, according to the Bureau of Labor Statistics.

That’s a concern, especially if you have state minimum auto coverage. A handful of states only require your policy to cover $15,000 or $20,000 in medical expenses per person in the case of an accident, and Floridians aren’t required to buy medical liability coverage at all.

That means even an average medical claim could be thousands more than your policy covers, and a particularly expensive accident could be financially crippling.

You don’t have to pay much more for better coverage

If your premiums are already going up, you may not be excited at the prospect of paying even more to make sure you’re properly covered. Luckily, doing so can be relatively inexpensive.

On average, a full-coverage auto policy with state-minimum liability coverage will run you $135 per month, according to Bankrate. Up your liability coverage to the $50,000/100,000/50,000 model (meaning $50,000 per person for medical bills, up to $100,000 total per accident, and $50,000 for property damage), and you’ll pay $142 on average — a $7 per month bump.

While some insurance firms may let you fiddle with your coverage on their website or mobile app, others will require you to talk to an agent, which is a good idea anyway, says Deventer. “They’ll be able to understand your specific needs,” she says.

If you find it will be costly to increase your coverage, start by asking your agent which common discounts — such as those for safe drivers or paperless accounts — may apply to you. You may also find more robust coverage at a better rate by switching insurers.

“It’s more important now than ever to re-shop to find a rate and a policy that works best for you,” says Pat Howard, managing editor and licensed property and casualty insurance expert at PolicyGenius. “It’s best to consult with an independent agent who is unbiased and can find you the best rate.”

If you’re considering rolling along with lower premiums and coverage that may not ultimately be up to snuff in case of an accident, remember that your policy is there to protect you from a potential financial disaster.

“Paying more is no fun, but this is a really important time to do it,” says Deventer. “Insurance is designed to protect your finances. If you get into an accident, your financial health is shielded.”

Sign up now: Get smarter about your money and career with our weekly newsletter

Don’t miss: Inflation is up 8.3% since last year—and more Fed rate hikes are likely looming

Take at least one risk per day.  This CEO says you won't regret it

.

Leave a Reply

Your email address will not be published.

Back to top button
AGADIR-GROUP