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The lasting impact of COVID-19 on car insurance rates

Written by Katie Dee

Edited by Alyssa DiCrasto

Published on 2023-11-25

Read time: 3 min

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From transformed school and workplace environments to economic downturn, the aftermath of the COVID-19 pandemic continues to be seen almost everywhere you look. The car insurance industry is no exception to this.

As the economy tries to right itself and consumers return to their pre-pandemic driving habits, the risk for car insurance companies has increased significantly. With rates rising to make up for this added risk, understanding the relationship between COVID and car insurance can help you to save on your annual premium.

How has COVID-19 affected car insurance rates?

Back in 2020, as the rapid spread of the pandemic caused businesses to start operating remotely, car insurance companies began offering drivers discounts and refunds on their premiums because cars were simply not being driven.

In fact, a report conducted by the Deloitte Center for Financial Services in the early days of the pandemic found that pandemic-related lockdowns led to a year-over-year decrease of 40.2% in the miles driven in April of 2020 and a 25.5% drop in May of 2020. With the roads emptying, car insurance rates began to decrease significantly.

However, this trend did not last for long. According to the U.S. Bureau of Labor Statistics, car insurance rates have gone up by over 28% from 2020 to 2023. That is an inflation rate of 8.63% per year. Compare this to the 3.36% increase in car insurance costs from 2017 to 2020, and the difference is clear.

Understanding the relationship between COVID and car insurance rate increases is just the beginning, though. The real question is how to save money on your premiums despite the mounting cost of car insurance.

How to save money on car insurance after COVID-19

According to Rate Retriever’s Quarterly Insurance Rates Update, the average cost for car insurance in 2023 is $1,824. Remember, your exact car insurance rate will vary depending on factors such as the state you live in, your driving record, and the make and model of your car.

There are also several methods you can try to save money on your car insurance premium, even in the aftermath of COVID-19. The first step you should take is comparing costs from multiple providers in your area. We can help you here, with our quick and easy quiz, you can compare car insurance rates side by side and find your cheapest option.

Rate Retriever’s report also found that credit score has a significant impact on car insurance rates in all states besides California, Hawaii, and Massachusetts. Knowing this, working to improve your credit rating is another option for reducing your car insurance rates. On average, drivers with excellent credit pay 17% less for car insurance than those with good credit while drivers with poor credit can expect to pay 84% more.

Another tip for lowering your car insurance rates: raise your deductible. Car insurance companies set rates based on the amount of risk a policy introduces to them, and by raising your deductible, you are taking some of that risk away.

Keep in mind, the higher your deductible, the more you will owe out of pocket if you ever need to file a claim with your insurance company. While raising your deductible can save you money on annual premiums, it may end up costing you more in the long run, so this may not be the best option for everyone.

Lastly, you may be able to save money on your car insurance premium by taking a defensive driving course. Several insurance companies offer discounts for policyholders who complete these courses because brushing up on drivers safety knowledge lessens their likelihood of filing a claim.

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