This year, expect to pay more for your car insurance. Even though inflation has been slowing down, car insurance costs have gone up. Since 2023, car insurance rates have surged 26%, and they’ll likely remain elevated until 2025, according to Bankrate’s True Cost of Auto Insurance Report. The report determined the annual cost for full coverage car insurance in 2024 to be $2,543, compared to $2,014 in 2023 and $1,771 in 2022. For someone earning the median household income of $74,580, that’s 3.41% of their entire income.
Insurers raise costs in response to your risk as a driver, such as where you live and whether you have a teenager on the policy. They also raise rates based on risks beyond your control, like inflation.
"Car insurance is reactionary, meaning the premium increases we’re seeing in 2024 are a result of insurance companies trying to recoup the losses they experienced over the last few years and accurately assess the risk of future loss," Bankrate analyst Shannon Martin shares with Kiplinger. "Between 2020 and 2024, inflation increased the cost of vehicle parts and labor, car crash fatalities increased by over 10% and we saw a significant rise in extreme weather and vehicle theft claims. All these factors contribute to the high rates we’re seeing today."
Car insurance costs in 2024
Along with these factors, Bankrate's report also found several “life events” that significantly increase your car insurance payments, and the average added cost of each.
- Adding a teenager driver to the policy: $2,878
- Convicted of a DUI: $2,247
- Credit score decreases from ‘good’ to ‘poor’: $1,795
- Involved in a car accident: $1,034
- Receives a speeding ticket: $523
- Has a lapse in auto insurance coverage: $276
Where you live also plays a role in how much you’ll pay. Bankrate found the most and least expensive states and metro areas for car insurance, showing just how much one state can vary to the next in terms of insurance prices. By analyzing the average total percentage of household income spent on car insurance, they found the "true cost" of car insurance for each state.
- State with the lowest true cost: Massachusetts
- State with the highest true cost: Louisiana
- Metro area with the lowest true cost: Seattle
- Metro area with the highest true cost: Detroit
While car insurance becomes increasingly more difficult to afford, beware the perils of underinsurance. Because car insurance rates have surged in 2024, many drivers are dropping coverage, putting both them and insured drivers without enough uninsured and underinsured motorist coverage at financial risk.
“There is good reason to ensure that you and your family are properly protected with your own insurance coverages, Jolie Deutschman at Rockville, Maryland-based law firm Stein Sperling, tells Kiplinger. "Getting auto insurance is what is costly. But, once you have coverage, increasing your coverage limits does not tend to increase your premium by very much at all!"
The Insurance Research Council found that on average, one in seven drivers, or 14% of motorists, were driving without liability insurance in 2022. The states with the highest percentage of uninsured motorists were the District of Columbia, with 25.2% of motorists uninsured, and New Mexico, with almost a quarter of drivers uninsured. For this reason, Deutschman warns people not to assume that other drivers have coverage, and to instead make sure their own coverage is sufficient.
"If you can’t afford a $300,000 Liability and Uninsured/Underinsured policy, then be sure to get the most you can afford ($100,000). Same with Medpay/PIP — if you can’t afford $10,000 per car, then get at least $5,000 a car," says Deutschman. "Having good insurance is the only way you can drive comfortably knowing that you and your family are protected."
You can compare car insurance rates today by using the tool below, powered by Bankrate.
Save on car insurance
Below are ways drivers can make car insurance costs more affordable, without dropping the appropriate coverage.
- Shop around: Car insurance prices will differ between companies, so shopping around can help you find the best policy at the best price. The Insurance Information Institute (III) recommends getting at least three quotes from different insurance companies and different types of insurance companies.
- Raise your deductible: If you raise your deductible, you can lower your premium costs. However, be sure you can afford your deductible in the event an accident does occur.
- Bundle insurance: Insurance companies will usually offer a discount when you purchase two types of insurance from them. For example, if you purchase both your homeowners insurance and car insurance from Progressive, you can save on average 7% on your auto policy.
- Boost your credit score: Many car insurance companies take your credit score into account when providing a quote. Ideally, you'll have a good credit score, which will help you get lower prices on your policies. Make sure to check your credit report regularly for any discrepancies and boost your credit score if you have bad credit. According to Bankrate, drivers with poor credit pay on average $4,338 a year for car insurance, compared to just $2,203 for drivers with excellent credit.
- Take a defensive driving course: If your insurance costs are elevated due to tickets or accidents on your driving record, you could benefit from taking a defensive driving class. Not only will it help you avoid future infractions, but many insurance companies offer discounts for drivers who complete a course. According to State Farm, drivers can save in some cases 10% on applicable coverages with the completion of a defensive driving course.
