Car insurance costs more, but ‘several million people’ may still not have enough, expert says

You're probably paying more for almost everything these days due to inflation, and auto insurance is no different. According to S&P Global Market Intelligence statistics, insurers have raised rates by an average of 8.3% this year, and consumer costs are expected to rise further, according to Bankrate analysts.

The price increases make sense for insurers: Insurance firms must collect more from their clients to keep up with the escalating expense of paying out claims. Drivers, on the other hand, will have to pay higher prices for the same coverage.

Why your auto policy may not provide enough coverage

Understanding how your current policy works are the first step toward ensuring you have adequate coverage. "People buy a policy and pay the bill monthly without checking what they have," Deventer says.

Your policy may include comprehensive and collision coverage, which covers various types of vehicle damage, and other coverages that pay for your medical bills in the event of an accident.

According to Deventer, liability coverage is the most important to focus on. If you are found to be at fault in an accident, this insurance covers property damage or other vehicles, medical expenses for other drivers, and any lawsuits you may face.

And the costs of filing car accident insurance claims are rising. According to the Federal Reserve Bank of St. Louis, auto parts cost has risen 13.4% in the last year.

Cars have become more complex as well, according to Deventer. "An accident that used to result in a ding in the bumper may now damage cameras or sensors."

Then there are the medical bills. According to the Insurance Information Institute, auto insurers paid an average of $20,235 for bodily injury claims resulting from car accidents in 2020. However, according to the Bureau of Labor Statistics, the cost of health care has risen 5.6% in the last year.

That's a problem, especially if you have state-mandated vehicle insurance. In certain jurisdictions, your insurance must only cover $15,000 or $20,000 in medical expenditures per person in the event of an accident, and Floridians are not obliged to purchase medical liability coverage.

It means that even a typical medical claim might cost thousands more than your coverage, and a costly accident could be financially ruinous.

You can pay less for better coverage.

If your rates are already rising, you may be reluctant to spend even more to ensure you have enough coverage. Doing so may be reasonably priced.

According to Bankrate, a full-coverage vehicle policy with state-minimum liability coverage will cost you $135 per month on average. If you increase your liability coverage to $50,000/100,000/50,000 (meaning $50,000 per person for medical costs, up to $100,000 total per accident, and $50,000 for property damage), you'll pay $142 on average - a $7 monthly increase.