Auto Insurance Trends in 2012

Auto Insurance TrendsThe inevitable question near the beginning of every year is, "Will my car insurance rates increase?" This year's answer is, unfortunately, yes. Rates for all kinds of insurance, including auto insurance coverage, are likely to increase. Auto insurance premiums, specifically are likely to be higher for the following reasons:

Cost of Medical Care:
With the unemployment rate continuing to be higher than average, and more and more companies cutting back on the types of health insurance they offer to their employees, the cost of medical care is rising. As a result, many states are boosting the required amount of liability coverage that motorists are required to carry. Liability coverage pays for injuries to other people, and damage to other people's property, when you are at-fault in an accident, so if medical care is more expensive, it makes sense that you would need a greater amount of this coverage, which translates into a greater cost to the insured driver. Nebraska is the most recent state to pass legislation regarding increased liability coverage.

Storm Damage:
While the bulk of damage from last year's winter storms, flooding, and tornadoes was to real estate, there were a significant number of cars and trucks either damaged or destroyed because of weather, which means the areas that suffered from extreme weather also saw an extremely high number of vehicle claims. This translates into higher insurance costs this year.

Green Technology:
Green cars may help you save money on gasoline, and there's no doubt they're better for the environment, but the cost of replacing hybrid and plug-in engine parts is still at a price-point that means higher insurance premiums. As more and more automakers shift toward alternative fuels and hybrid powertrains, insurance for these new breeds of vehicle will continue to rise, however, it will eventually plateau, and even start to decrease once these cars represent a significantly higher percentage of all vehicles on the road. For this year, however, expect that if you drive a hybrid or plug-in car, it will cost more to insure.

While this outlook may seem dire, the good news is that there are still ways to offset increases in the cost of auto insurance. Pay-as-you-drive (PAYD) insurance is becoming more and more popular, because it gives you, the driver, some control in the size of your premiums. If you have a short commute, work from home, or are a stay-at-home parent, you should consider this type of insurance.

Also helpful is insurance that comes with decreasing or disappearing deductibles. Your premium won't change, but the longer you go without an accident or other claim, the lower your deductible will be. Loyalty discounts are also a good way to save, and if you live in California, you may be able to take that discount with you, even if you change companies, thanks to an auto insurance discount act being considered on the ballot this fall.

The bottom line is this: yes, insurance rates are going up this year for a variety of reasons, but if you are a savvy shopper with a clean driving record, finding cheap auto insurance is still possible.