Auto insurance premiums
With rates climbing faster than inflation, drivers are facing tough choices between essential expenses and keeping their vehicles on the road. Pexels

Auto insurance premiums are rapidly increasing again, putting a significant financial strain on millions of Americans nationwide.

A new report from Insurify, an insurance comparison platform, reveals that the average annual cost of full-coverage auto insurance in the United States skyrocketed to $2,329 in the first half of 2024.

This represents a 15 percent increase compared to 2023 and a staggering 48 percent surge since 2021. The report predicts that this upward trend will continue, with the average cost reaching $2,469 by the end of 2024.

Several factors have contributed to the sharp increase in car insurance rates. Bloomberg's Keith Naughton highlighted five main contributors:

  • Rising repair costs: Increased car technology and the higher cost of EV repairs drive up insurance claims.
  • More and worse accidents: Traffic fatalities have surged, leading to larger insurance payouts.
  • Technician and parts shortages: Lack of skilled labour and car parts impacts repair times and costs.
  • Increased driving: Post-pandemic driving habits have led to more accidents and higher claims.
  • Insurance industry catch-up: Insurers adjust premiums to reflect increased risks after pandemic discounts.

Given the factors driving up insurance costs nationwide, it's no surprise that some states have been hit harder than others. Here are the ten most expensive states for car insurance.

1. Maryland

  • Average annual cost of full coverage: $3,400
  • Percentage higher than the US average: 46 percent
  • Projected average rate increase in 2024: 41 percent

Maryland residents face the highest auto insurance costs in the nation, with an average monthly premium of $283. This steep price tag, reflecting a staggering 43 percent year-over-year increase, may be linked to a surge in traffic fatalities.

Maryland experienced an 8.2 percent rise in motor vehicle deaths in 2023, significantly higher than the national average decline of 3.6 percent. New state legislation, effective July 1, 2024, mandates enhanced uninsured motorist coverage (EUIM) for all auto insurance policies.

This policy change, allowing drivers to combine the at-fault driver's liability insurance with their own uninsured or underinsured motorist coverage, will likely contribute to further premium increases as insurers adjust to the added financial responsibility.

2. South Carolina

  • Average annual cost of full coverage: $3,336
  • Percentage higher than the US average: 43 percent
  • Projected average rate increase in 2024: 38 percent

South Carolina follows closely behind Maryland with a 43 percent year-over-year surge in full-coverage auto insurance premiums, reaching an average of $278 per month by June 2024.

The state's notorious reputation as the 13th most fraud-prone region for vehicle-related insurance claims, as reported by the National Insurance Crime Bureau (NICB), undoubtedly contributes to these elevated rates.

Insurers carefully factor in the potential for fraudulent claims when determining premiums. Moreover, the heightened risk associated with an active 2024 hurricane season adds to insurance costs.

A landmark 2023 South Carolina Supreme Court ruling imposed stricter financial obligations on auto insurers. The decision mandates that insurers cover property damage claims extending beyond the insured vehicle when dealing with uninsured or underinsured motorist coverage (UM/UIM).

This expanded coverage could increase premiums as insurance companies adjust to the new financial responsibilities.

3. New York

  • Average annual cost of full coverage: $3,325
  • Percentage higher than the US average: 43 percent
  • The projected average rate increase in 2024: 4 percent

Once holding the unfortunate title of the most expensive state for full coverage auto insurance, New York experienced a modest 1 percent decrease in premiums during the first half of 2024. However, this slight reprieve is overshadowed by the more significant rate hikes in other states.

New York's densely populated environment, ranking ninth in the nation, contributes to higher insurance costs due to the increased likelihood of accidents and claims.

Compounding the problem is New York's dubious distinction as the state with the highest number of car thefts in the US, with a staggering 32,715 vehicles stolen in 2023. This elevated theft rate further amplifies insurance risks, driving premiums upward.

The impact of rising car theft rates is evident in the recent difficulties car owners face. A Minnesota resident, Erin Walters reported being denied insurance coverage by multiple companies due to her car's make and model.

As a direct response to the surge in theft claims, State Farm has implemented a temporary moratorium on new policies for specific Hyundai and Kia models in certain regions. These measures highlight insurers' challenges in managing increased risks and the subsequent impact on consumers.

4. Nevada

  • Average annual cost of full coverage: $3,271
  • Percentage higher than the US average: 40 percent
  • The projected average rate increase in 2024: 20 percent

Nevada has experienced a substantial 20 percent increase in full-coverage auto insurance premiums since June 2023, with the average monthly cost now reaching $273. The state's ranking as the third highest in vehicle theft rates, with 572.7 thefts per 100,000 residents, significantly contributes to the increased insurance risk.

Nevada's escalating climate risk is poised to impact future premium rates further. The state's annual average of 450,000 acres burned by wildfires, combined with the occasional damage from hurricanes and tropical storms, elevates the risk of car damage. As a result, insurers are likely to incorporate these environmental factors into their premium calculations.

5. Florida

  • Average annual cost of full coverage: $3,201
  • Percentage higher than the US average: 37 percent
  • Projected average rate increase in 2024: 18 percent

Florida drivers face an average monthly cost of $267 for full coverage insurance, a price significantly impacted by the state's ongoing insurance crisis. Severe weather events have triggered a domino effect, with insurers exiting the market entirely or declaring insolvency.

Notable examples include Farmers Insurance's withdrawal from the state in 2023 and AAA's non-renewal of specific policies. In response to this crisis, Florida has enacted a series of legislative measures to reduce frivolous lawsuits, lower insurance costs, and combat auto insurance fraud.

These reforms have primarily focused on the state's notorious no-fault system, responsible for a staggering 74 percent of questionable auto glass claims nationwide. Despite these efforts, Florida remains a challenging market for insurers, characterised by low profitability.

Consequently, residents continue to bear the brunt of this instability through some of the nation's highest auto insurance rates.

6. Louisiana

  • Average annual cost of full coverage: $3,182
  • Percentage higher than the US average: 37 percent
  • Projected average rate increase in 2024: 23 percent

Louisiana drivers face a steep average of $261 monthly for full coverage insurance, a cost increasingly driven by the state's escalating insurance crisis. While the situation has primarily impacted homeowners, the growing risk of hurricanes and tornadoes also affects car insurance rates. Comprehensive coverage, essential for protecting against weather-related damages, contributes to this rise.

In addition, Louisiana experienced a 10 percent surge in vehicle thefts in 2023, according to NICB data. This increase in stolen vehicles further elevates insurance risks and, consequently, premiums. In response, Louisiana lawmakers enacted auto insurance reforms in 2024.

These measures aim to curtail excessive medical billing in personal injury lawsuits and shorten the timeframe for policyholders to file immovable property claims to two years from the date of known or reasonably knowable damage. The reforms are intended to lower car insurance rates by reducing insurer liabilities.

7. Delaware

  • Average annual cost of full coverage: $2,982
  • Percentage higher than the US average: 28 percent
  • Projected average rate increase in 2024: 13 percent

Delaware drivers are shelling out an average of $249 monthly for full coverage insurance, a 9 percent increase since June 2023. The state's high population density, ranking seventh in the nation, contributes to congested roadways, increasing the likelihood of accidents and insurance claims.

However, there's a silver lining for Delaware policyholders. In January 2024, the state's Department of Insurance implemented a new rule mandating prompt refunds of unearned auto insurance premiums when a policy is cancelled. This regulation relieves drivers by ensuring they receive timely reimbursement for unused coverage.

8. Washington, DC.

  • Average annual cost of full coverage: $2,977
  • Percentage higher than the US average: 28 percent
  • Projected average rate increase in 2024: 17 percent

District of Columbia drivers face a steep 17 percent year-over-year increase in full coverage insurance costs, bringing the average monthly premium to $248. According to NHTSA data, the nation's most densely populated area, DC, also experienced a staggering 40 percent rise in traffic fatalities between 2022 and 2023.

This dangerous combination of factors increases the likelihood of insurance claims, driving up premiums. However, relief may be on the horizon. The DC legislature has implemented a new law requiring insurers to obtain prior approval for rate hikes. This replaces the previous "file-and-use" system, which allowed immediate rate increases.

9. Michigan

  • Average annual cost of full coverage: $2,719
  • Percentage higher than the US average: 17 percent
  • Projected average rate increase in 2024: 8 percent

Michigan's 2019 adoption of a no-fault insurance system aimed to curb rising rates, but challenges persist. While the state experienced a more modest 4 percent increase in full-coverage premiums between June 2023 and June 2024 compared to the nationwide 28 percent surge, Michigan's average of nearly $227 per month remains among the highest in the country.

High fraud rates are exacerbating the issue. The Michigan Department of Insurance and Financial Services reported a staggering 3,789 fraud cases between July 2023 and June 2024, with 99 percent of the cases insurance-related and half involving auto and no-fault claims. This rampant fraud increases insurance risks, ultimately leading to higher premiums for honest policyholders.

10. Georgia

  • Average annual cost of full coverage: $2,688
  • Percentage higher than the US average: 15 percent
  • Projected average rate increase in 2024: 24 percent

Georgia drivers pay an average of $224 monthly for full coverage insurance. A significant factor contributing to these high costs is the state's substantial vehicle theft problem. Georgia ranked ninth in the nation for car thefts in 2023, with over 28,000 vehicles reported stolen. Insurers factor this heightened risk into premium calculations, driving up rates for all policyholders.

In July 2023, Georgia enacted House Bill 221, requiring a 60-day review period for rate increases to curb rising premiums. However, despite this new regulation, full coverage costs surged by 21 percent between June 2023 and June 2024, indicating that other factors also drive up insurance expenses.

Given the rising costs of auto insurance, it's essential to consider all available options to protect your investment. While comprehensive coverage is crucial, an often overlooked but potentially vital add-on is Guaranteed Asset Protection (GAP) insurance. GAP coverage bridges the gap between a vehicle's actual cash value and the remaining loan or lease balance in case of a total loss.

The importance of GAP insurance is underscored by the experience of Drea, a woman who purchased a secondhand Tesla without this coverage. When Drea was involved in an accident, her standard insurance payout fell short of her loan balance, leaving her with $700 monthly payments for a car she could no longer drive.

Such situations highlight the financial risks associated with forgoing GAP insurance, especially in states with high vehicle theft rates and rising insurance costs.

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