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Budgeting for 2024? Set aside extra money for car insurance

Natalie Todoroff Amelia Buckley
Written by
Natalie Todoroff,
Edited by
Amelia Buckley
Published on December 19, 2023 | 8 min read

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If you’ve set a New Year’s resolution to save money in 2024, you might want to take a closer look at your car insurance policy. Monthly rate data from Quadrant Information Services shows that average car insurance premiums increased substantially throughout 2023, but certain months, states and carriers saw bigger increases than others. Our forecast for 2024 indicates a high likelihood for rate increases for most Americans, but some may need to budget more than others in the new year.

Is car insurance going up in 2024?

We cannot peer into a crystal ball to predict how auto insurance rates will fluctuate next year. However, if the 2023 data is any indicator, rates are on the rise. In January 2023, the national average cost of a full coverage car insurance policy was $2,014 per year. Minimum coverage averaged $622 per year. By December 2023, the average full coverage rate rose by 19 percent to $2,395 per year. The average annual minimum coverage rate also increased by 19 percent from January to December, growing from $622 to $738.

Rate increases throughout 2023 are not the only indicators of higher rates in 2024. Mark Friedlander, director of corporate communications for the Insurance Information Institute, also agrees that the car insurance rate outlook for 2024 is already looking expensive:

Car insurance rates are expected to continue to increase in 2024 due to costlier repairs, driven by parts shortages and higher costs of labor, as well as low inventories of vehicles, which generates higher costs to replace vehicles totaled by insurers. From 2020 through 2023, cumulative replacement costs increased an average of 45 percent, whereas inflation for the overall U.S. economy increased 15 percent within the same timeframe. — Mark Friedlander, Director of corporate communications, Triple-I
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What's driving higher rates?

Economic inflation alone is not to blame for car insurance rate increases. While it certainly is a large driver in why coverage is getting more expensive, Bankrate’s research found that the issue is more complex:

 

  • Higher repair costs after an accident: An increasing number of modern vehicles come equipped with a suite of high-tech features like blind spot monitoring, forward collision warning and lane-keeping assistance. These intricate systems help reduce the chance of accidents but require more specialized and complex repairs. At the end of 2022, average repair costs were up 12 percent from the year before and hovered around $4,250.
  • Poor post-pandemic driving habits: The COVID-19 pandemic made us worse drivers. The emptier roads during the height of lockdown encouraged people to drive more recklessly, and we do not seem to have broken the habit. In a study by AAA, nearly 23 percent of drivers admitted to speeding behind the wheel, while another 17 percent revealed they drove distracted.
  • Insurers recuperating heavy losses from prior years: Insurers faced high loss ratios in the past couple of years. According to Friedlander, 2023 is expected to end with a “110.5 combined ratio, meaning [insurers] are paying out more than $1.10 for every dollar collected in premium.” When facing such high losses, many insurers have little choice but to raise rates to remain profitable.
  • Elevated levels of auto theft: Data from the National Insurance Crime Bureau reports that over one million vehicles were stolen in 2022, the highest level since 2008. Monthly theft totals in 2022 were consistently in excess of 75,000, causing comprehensive coverage claims to rise as a result.

How car insurance rates changed in 2023

Auto insurance rates fluctuate from January to December. Insurers can file for rate increases with a state’s department of insurance throughout the year. If the rate increase is approved, policyholders pay a higher rate once their car insurance renews. Many policyholders don’t expect their rates to increase unless they file a claim, raise their coverage limits or do something else to impact their policy rating, but systematic rate increases mean you could still be hit with a rate increase when your policy renews even if nothing has changed from the year before.

When did auto insurance rates increase in 2023?

Looking at the month-to-month data for 2023, the national average cost of car insurance changed the most during February, August and November. Of these three months, August saw the most dramatic rate increases, with the average cost of a full coverage policy jumping nearly 11 percent and minimum coverage increasing just over 10 percent compared to the beginning of the year.

To compare, full coverage rates in November increased by nearly 2 percent, while minimum coverage grew by just over 3 percent. Average full and minimum coverage rates in February increased by 1 and 1.4 percent, respectively.

It is difficult to highlight a single reason as to why August proved to be such an expensive month for car insurance. It could be that August is a popular month for insurance renewals. August’s timing would also align with February’s rate raise, as many auto insurance policies have six-month terms.

Tax refunds, coupled with President’s Day discounts, could also play into the February-August auto insurance increase. Many car shoppers receive their tax refunds in January. With a little extra cash in their pockets, these drivers perhaps wait to take advantage of the mid-February Presidents’ Day auto discounts. According to a report from iSeeCars, Presidents’ Day weekend offers nearly 33 percent more deals for used vehicles than average. For shoppers who purchase vehicles in February, an auto insurance policy with a six-month term would be up for renewal in August.

Where are car insurance rates increasing?

For our state-by-state analysis, we chose to home in on the month of August. Average rates increased more in August than any other month in 2023. In the table below, we showcased the ten states where average yearly full and minimum coverage rates increased the most from January to August.

Missouri topped the list for both full and minimum coverage average rate increases, which indicates that drivers in the Show-Me State may need to reevaluate how much they budget for auto insurance in 2024. Ohio’s rate increases tailed Missouri, sitting in the second-place spot for both full and minimum coverage averages. Utah, New Mexico and North Dakota also stand out with high average rate increases for both full and minimum coverage policies.

How much did my carrier raise rates in 2023?

Looking again at average rate increases over the first eight months of the year, Bankrate closely analyzed which specific auto insurers raised their rates and by how much. The table reflects national average full and minimum coverage policy increases for the car insurance companies with the largest percentage of total market share (with the exception of Liberty Mutual, as average rates from the company are not available).

State Farm and Farmers customers may already be feeling the effects of hefty rate increases upwards of 40 percent. Progressive customers, on the other hand, may fare better in the coming year, as the insurer’s rates remained level during the August rate hike.

Will insurance rates ever go back down?

Many things would have to change for car insurance rates to decrease. In an interview with Bankrate, Robert Passmore, a vice president of the American Property Casualty Insurance Association, cited driving behavior as one of the key catalysts of insurance increases, stating: “The most important thing drivers can do is take control of their driving habits, slow down, and put their phones down.”

We often write about the personal rating factors that influence car insurance costs. While things like the car you drive, where you live and your claims history are all key factors insurers use to calculate your rate, it is important to remember that individual car insurance costs can also depend on the driving behavior of others.

Car insurers collect premiums from policyholders to hold in reserve. When someone files a claim, insurers use the reserve money to pay the claim. Dangerous driving habits, such as speeding, can influence the severity of accidents and the cost of claims, plus make roads more dangerous for everyone around them. If more people are driving recklessly and filing expensive claims with their insurers, insurers may need to hold more money in reserve for future payouts. This means safe drivers can also pay the price for others’ recklessness.

Improved vehicle technology is another reason why car insurance is so expensive. Advances in vehicle technology are a double-edged sword when it comes to insurance costs: accident mitigation features are effective in preventing collisions, but when these features are damaged, they cost significantly more to repair. Since 2020, property damage liability and collision claim severity have risen 36 percent to nearly $6,000 in 2023 according to a study from APCIA. New vehicles are not going to become more low-tech, and claims costs are unlikely to decrease. Passmore agrees, stating: “The question will be how much of [these rate increases] are temporary and how much are permanent?”

How can I get cheaper rates in 2024?

If our car insurance outlook for 2024 has you worried, don’t panic. There are still a number of things you may be able do to help curb the effects of high car insurance rates in the new year:

  • Shop around (on your schedule): You do not have to wait until your policy is up for renewal to change carriers. Many insurance providers allow you to cancel your policy at any time with no cancellation fee. If you are comparing car insurance quotes and find a better deal, you may be able to take advantage of it even if your policy has recently renewed.
  • Consider a telematics device: If your insurer offers a telematics program, it could help you score significant savings. These programs also track driving behavior, so participation can help hold you accountable and build good habits behind the wheel.
  • Ask about discounts: A lot can change in a year, and it may be helpful to chat with your insurance agent to see if you missed any discounts when you initially signed up for your policy.

Shannon Martin, a licensed insurance agent and writer for Bankrate, suggests thinking outside the box to find new car insurance savings:

When looking for a cheaper auto policy, get creative to find ways to save. Can you start carpooling with a neighbor or co-worker or join your company's park and ride program? Many insurance companies also offer pay-per-mileage plans for low-mileage drivers or telematics programs, which may make you eligible for policy discounts and a low annual mileage rating. — Shannon Martin, Bankrate insurance analyst

The bottom line

Paying a car insurance premium isn’t anyone’s favorite thing to do, but it’s arguably one of the most important bills you pay. Car insurance provides valuable financial protection, and without it, you may be financially and legally vulnerable. If you’re frustrated to see your insurance premium increase, you’re likely better off looking for ways to save instead of foregoing insurance altogether. A licensed insurance agent may be able to help you shop around and identify personalized ways to maintain low rates in 2024.

Methodology

Bankrate utilizes Quadrant Information Services to analyze 2023 rates for ZIP codes and carriers in all 50 states and Washington, D.C. Rates include the most recent approved rate increases filed by insurance companies and are weighted based on the population density in each geographic region so that policyholders can see the impact rates have in their areas. Quoted rates are based on a 40-year-old male and female driver with a clean driving record, good credit and the following full coverage limits:

  • $100,000 bodily injury liability per person
  • $300,000 bodily injury liability per accident
  • $50,000 property damage liability per accident
  • $100,000 uninsured motorist bodily injury per person
  • $300,000 uninsured motorist bodily injury per accident
  • $500 collision deductible
  • $500 comprehensive deductible

To determine minimum coverage limits, Bankrate used minimum coverage that meets each state’s requirements. Our base profile drivers own a 2021 Toyota Camry, commute five days a week and drive 12,000 miles annually.

These are sample rates and should only be used for comparative purposes.

Written by
Natalie Todoroff Arrow Right Icon
Writer, Insurance
Natalie Todoroff is an insurance writer and industry analyst for Bankrate. She is based in San Francisco and holds a personal lines insurance license.