Table of Contents
If you are one of those who have considered 2023 as the ideal year to buy a new car in the US, surely you already know that within the costs of any purchase of a car you must add the cost of auto insurance because unless you live in one of the states where these financial instruments are not mandatory, paying auto insurance is required to drive legally through the country.
But the auto insurance outlook for 2023 doesn’t look entirely ideal, at least for your pocket. The reason? Auto insurance in the US will increase significantly in 2023.
According to a study conducted by Insurify, US drivers will have to pay approximately $1,895 for each auto policy in the year 2023.
This represents an increase of 7% compared to the average registered in 2022, and 29.5% if we compare it with that of the year 2020. This would be the first time that auto insurance premiums are, on average, $150 dollars a month.
Is car insurance mandatory in the United States?
The short answer: Yes, it is mandatory to have auto insurance in the United States.
The long answer: It is necessary to have auto insurance or insurance in the United States to drive legally and maintain your license and registration.
However, it takes more than just having the minimum amount of coverage to avoid any trouble if you’re pulled over. So here are the answers to some of the most common questions about US auto insurance requirements.
Why will auto insurance in the US increase by 2023?
According to an Axios report, a major factor in the cost of auto insurance in the US will, of course, be the cost of new vehicles which hit a new record last summer: up to $47,000.
Chase Gardner, a data journalist at Insurify, explained to Axios that the higher the cost of the vehicles, the higher the hypothetical cost of repairs and parts in the event of an accident. “This is a very important factor in explaining why insurance costs have increased so much in the last two years.”
Another reason why the cost of car insurance will increase is the increase in car accidents in the United States which generates, as expected, a greater number of claims to insurance companies.
According to the National Highway Traffic Safety Administration (NHTSA), the years 2020 and 2021 were the deadliest on the roads since 2007, at least when it comes to crash rates. fatalities per miles driven.
Yes, as hard as you may believe it, your auto insurance premiums can go up even if you haven’t filed a claim.
Why is auto insurance mandatory in the US?
Having an auto insurance policy in the United States is a sign that you are capable of assuming responsibility for any damage in the event of an accident.
While some states vary in the requirement to carry liability insurance, ALL states have some type of law that requires drivers to show financial responsibility with a liability policy.
For others, you would have to show proof of income to be able to pay for medical bills or damage to the affected vehicle (even more so if you are at fault for the accident). If you cannot provide this proof, the legal penalties can be:
- Driver’s license suspension
- Suspension of your car registration
Also, if you don’t have auto insurance, you could face a financial catastrophe if you’re in an accident and don’t have the means to pay for the damages.
Aside from the law that requires auto insurance, most lenders expect you to purchase full coverage auto insurance as part of the terms of your auto loan. This is to protect your asset which is the car itself.
What is the purpose of car security?
The purpose is to protect you financially and to protect your property or that of your lender if your car is financed.
The main reason, however, is to cover the cost of damage to the vehicle (yours and/or someone else’s) and medical expenses for injuries. Plus, your auto insurance will cover you even if you don’t own it.
In addition to the coverage of medical costs and collision damage, you can buy auto insurance in the United States that covers the expenses of fire, theft or vandalism. However, these additions are not necessary.
Some states also require you to get coverage against uninsured or under insured motorists. However, in some states you need to purchase collision coverage that pays for damage to your own vehicle in an at-fault accident.
What is the minimum requirement for auto insurance?
Liability coverage is the minimum auto insurance required. Similarly, the laws dealing with car insurance in the United States can vary slightly by state.
In fact, all but two states have minimum liability requirements that all drivers must meet. New Hampshire and Virginia only require that you be able to cover the financial responsibility of an accident.
In many states, the minimum amount of auto insurance covered by the law for bodily injury and liability is $50,000 and $25,000, respectively.
Although for the most part, when you look at auto insurance, it will read like this: 20/40/10.
- The 20 is the minimum amount of liability per person that it covers in an accident for bodily injury or death ($20,000).
- The 40 is the maximum amount it will cover for everyone involved in an accident ($40,000).
- Finally, the 10 corresponds to the amount of coverage that the policy provides for property damage (10,000).
By remembering these three numbers, you will be well informed about the coverage of the policy and choose the one that best suits your needs.
What if I don’t have a car, but still have to drive?
One option to consider is non-owner auto insurance. Basically, it’s like having a car insurance policy, but without the car. Provides liability coverage if you borrow or rent a car often. This could help protect your assets in case you caused the accident and the other driver sues you.
However, non-owners insurance will not cover damage if you are using a car that is owned by someone who lives in the same household.
Also, if you’re using a friend’s car, that person’s liability insurance will cover damage up to their policy limits. From there, your non-owners insurance will take care of the rest.
What if I can’t afford auto insurance?
You have a few options to consider:
- Negotiate with your agent for a lower rate; otherwise, look at other insurance companies.
- Decide whether or not you need collision coverage by checking the current value of your vehicle (if you are not financing it).
- Talk to your agent about deductibles. If it is higher, the premiums decrease.
- Ask your agent to tell you about possible auto insurance discounts for low mileage, not having processed previous claims, setting up automated payments, or registering multiple vehicles on the same policy.
What states do not require auto insurance?
Only two states, Virginia and New Hampshire, do not require auto insurance, but do have provisions if you do not purchase a policy:
- New Hampshire: Submit proof that you meet the motor vehicle financial responsibility requirements in the form of an SR-22.
- Virginia: Buy Uninsured Motorist Coverage.
While this exemption may seem ideal, consider visiting a knowledgeable insurance agent who will explain the risks and benefits of not having auto insurance in these states.
What are the other types of coverage?
Some locations require other types of coverage in addition to the minimum. When you visit with an agent, you’ll become more familiar with the three main types of coverage offered by most auto insurance providers. These include liability, collision, and comprehensive.
This is the minimum you would need to be a legally insured driver. Liability protects the driver in both cases when he is responsible for the accident or if he is held liable even though he technically did not cause it.
This is auto insurance that includes auto repair coverage related to traffic accident cases, no matter who is at fault.
This coverage incorporates vehicle replacement if it is damaged by natural disasters or theft.
Rates vary between different auto insurance companies, but an agent can help you navigate through the different selections while you compare prices in order to stay within your budget.
In which states will auto insurance rise the most in 2023?
The Insurify study points out that Oregon, Maryland and Virginia will be the states with the highest increase in auto insurance costs.
How can I avoid being hurt by US auto insurance increases for 2023?
With an inter annual inflation of 7.7% in the month of October, The increase in car insurance prices can pose a difficulty for more than one consumer in the United States.
That is why financial planning specialists recommend applying strategies that allow you to save on the cost of this service, such as:
- Reduce the mileage of your vehicle.
- Check if your policy has ornaments or add-ons that you consider unnecessary so that you can remove them.
- Compare prices of policies from different companies (we have made a list of the cheapest, to make your work easier).
- Combine your home insurance and your vehicle insurance.
- Investigate what discounts your company offers and which ones you can opt for if you have a good payment and driving record.
- Improve your credit score.