Auto Insurance Rates May Rise in 2021. How to Pay Less

Many companies presented on Money advertise with us. Opinions are our own, but compensation and
In-depth research will determine where and how companies can appear. Find out more about how we make money.

Over the past year, a combination of boredom and empty highways has turned some American motorists into speed demons. Now that the pandemic is subsiding and normal traffic is returning, these reckless driving habits can increase car insurance prices – even for those of us who never drive in yellow.

The way insurance spreads the risk means that good drivers essentially pay part of the cost of accidents caused by bad drivers. But better drivers can take steps to protect themselves from paying for the worst people behind the wheel. And now might be a particularly good time, given what a distinguished researcher is predicting on American roads over the coming months.

Assured Research said this month it fears poor driving habits will worsen car accidents and injuries in 2021, perhaps above pre-pandemic levels. This trend could lead to higher premiums for many policyholders as claims settlement costs rise due to the increasing number of accidents, said company president William Wilt. He sees “a worrying increase in car traffic and risks on the roads of America starting this summer, but this will increase particularly sharply after Labor Day 2021”.

It is now unclear whether the insurance companies will continue to return more premiums that they collected in 2020 but then did not spend due to reduced mileage.

Some of the savings were passed on to drivers later in 2020, and some states are now ordering more givebacks. But consumer groups are still not satisfied. The overall record of insurers in terms of premium repayments for 2020 is “bleak … and stingy,” says Teresa Murray, consumer watchdog at the Public Interest Research Group.

Usage-based auto insurance could offset rising tariffs in 2021

Motorists are not powerless to protect themselves from the cost of more dangerous roads in 2021.

First, you can consider what is called usage-based insurance, which sets your tariffs in part based on how you drive – reducing the extent to which poor driving by others affects your own tariffs.

The introduction of so-called telematics requires convenience, as the insurer monitors your journey using an on-board device or a smartphone app. But assuming you can live with it, even if you decide not to stick with the technology, you can save temporarily by trying your insurer’s pay-as-you-go option. Not every major insurer offers such an option in every state yet, but the offer is growing.

Wilt puts it clearly: “If your insurance company offers a telematics-based program, register for it.”

Ads for money. We may be compensated if you click on this ad.display

With car insurance you protect your car and yourself.

A wide range of insurance policies is available to you. Find the one that best suits your specific needs today. Get started shopping now by clicking below.

Get a free quote

If your price goes up, start browsing

Even if you decide to try your current insurer’s telematics option, it’s wise to compare the rates of different car insurance providers – and this year more than ever, say some experts. “I would encourage people to look around and compare prices, especially if they are now working remotely and expect it to stay that way,” says Murray.

While there are no guarantees of a better price anywhere else, the move could well save you money – as in a 2019 Consumer Reports survey of almost two-thirds of readers. The premium quoted by the cheapest insurer can be hundreds – and sometimes thousands – of dollars less than the most expensive, according to a pricing survey.

Higher car insurance rates are not generally forecast for 2021, and some analysts even anticipate slight decreases in premiums as driving continues to be reduced. And Wilt admits that increases are not a certainty, in part because insurers would have to convince regulators – who must approve tariffs in many states – of their need for higher revenues. “That may not be easy after a year (2020) in which the industry posted record profits.”

Still, shopping, including trying out telematics, is potential cost saver no matter how car insurance premiums change in 2021.

More from MONEY:

The best cheap car insurance for 2021

Your auto insurance app can be incredibly helpful after an accident

Is Usage-Based Auto Insurance Right For You? These 5 questions will help you figure it out