Money Management

Americans are suffering from a painful surge in car insurance prices. Learn more about why car insurance prices are so expensive, and how you can save money. 

Car insurance prices are rising fast in America. According to a survey from industry analysts at Insurify, the average annual cost of a car insurance policy increased by 17% in the first half of 2023. There are several complex reasons why car insurance prices are skyrocketing, ranging from post-pandemic distracted driving to climate change and natural disasters.

We talked with a few car insurance industry experts to see how people can navigate the landscape of higher insurance prices, whether there is hope for lower prices on the horizon, and what you can do to reduce your car insurance costs today.

Here are a few big insights into why car insurance prices are so expensive, and what you can do about it.

Americans are getting in more car crashes

One surprising result of the pandemic is that it seems to have made Americans worse at driving. According to data from the Insurance Institute for Highway Safety (IIHS), from 2020 to 2021, there was a 10% increase in fatal motor vehicle crashes.

This is a tragic sign that Americans’ driving habits have gotten less safe in the past few years. There are a few possible reasons why Americans are having more car crashes:

Drinking and driving: Alcohol consumption increased significantly during the pandemicDistracted driving: More people are looking at phones or multi-tasking while behind the wheelRegression in driving skills: Some people got out of practice with driving, due to driving less during pandemic-era lockdowns and working from homeAggressive driving: Too many people are driving too fast, are vulnerable to road rage, and are taking unnecessary risks at the wheel

Car insurance companies are ultimately in the business of collecting money upfront (premiums) to pay for car repairs and medical bills in the future (insurance claims). When people get in more car crashes, insurance companies have to bring in more money by raising premiums on everyone.

Fixing cars is getting more expensive

Another cause of rising premiums, in addition to more dangerous driving, is the escalating cost of paying for vehicle repairs. When you get in a car crash and have to call your insurance company to file a claim, the insurance company can help you find a body shop to get your car fixed. But getting your car fixed after a car crash doesn’t often happen overnight.

According to Nick Schrader, insurance agent and owner of Second Western Insurance, many mechanics and auto body repair shops have been slammed with work, and have struggled to find auto parts due to supply chain problems. These car repair shops have also had to raise prices to keep up with their own costs of doing business.

“Because of all these factors, the costs of car insurance claims have skyrocketed,” Schrader said. “It is more expensive to repair or replace a vehicle because the cost of labor and materials have gone up with inflation, and it is difficult to get the labor completed in a timely fashion.”

Better car technology has also made it more expensive to buy car insurance. It’s great to have advanced safety features that are becoming more prevalent with newer vehicles. But when a car gets in a crash, or suffers a simple kind of damage like a broken windshield, those advanced features can make the car repairs even more pricey.

“Technology advancements are also impacting insurance losses,” Schrader said. “For example, a basic glass claim for a rock hitting a windshield can cost over $1,000 because the glass has lane changing sensors that also need to be replaced. Insurance carriers are increasing rates to make sure they have enough premium to settle losses.”

What you can do now to fight high car insurance prices

We asked a few industry experts if there are signs of hope for future reductions in car insurance prices. Schrader predicts that, unfortunately, high car insurance prices are likely here for the foreseeable future. “I do not expect rates to go down anytime soon,” he said. Schrader says that the overall impact of inflation, rising costs of claims, and the basic need for insurance companies to stay profitable is going to keep insurance rates high.

But even if car insurance rates stay higher at a national or industry level, there are still a few key moves you can make right now to get lower prices on car insurance.

“People can get discounts on their auto insurance by asking their insurance company for discounts related to education, professional associations, driver safety training, low mileage, and bundling policies together,” Schrader said. “If you keep your current insurance, you can always increase your deductibles, and/or remove physical damage coverage on older vehicles that do not need to be repaired or replaced after a loss.”

Another idea to get cheaper car insurance is to try a pay-per-mile car insurance policy. If your driving habits have changed in the past few years and you’re not driving as often, you could save money by only paying for the coverage that you need. Some car insurance companies also let you earn a big discount with a special program called telematics car insurance. With telematics, you give your insurance company permission to track your driving data via mobile device, and you get rewarded for being a safe driver.

Keep in mind that even if car insurance gets more expensive on a national level, you still have choices. Your personal car insurance situation depends on a number of factors, like the age of your vehicle, where you live, and how you drive. You can ask for discounts, raise your deductible, or shop around for a new policy. The best car insurance companies can still offer competitive rates and will want to win your business.

Our best car insurance companies for 2022

Ready to shop for car insurance? Whether you’re focused on price, claims handling, or customer service, we’ve researched insurers nationwide to provide our best-in-class picks for car insurance coverage. Read our free expert review today to get started.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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As every traveler knows, flying can be expensive. Keep reading for one way to keep the cost to a minimum. 

Whether you’re a road warrior or only take the occasional trip, you probably want to save money on travel. If so, it’s good to understand how positioning flights work. A positioning flight is a flight you purchase for one purpose: to get to another airport where your “real trip” will start.

Here, we’ll discuss how a positioning flight works, its benefits, and its risks.

How a positioning flight can benefit you

Imagine you’re planning a trip to Frankfurt, Germany. As you check out airfares, you notice that flying from your local airport to Frankfurt will cost you nearly $600 more than flying from Chicago to Frankfurt. What you need is a convenient, inexpensive way to get to Chicago. And that’s where positioning flights come in. Instead of booking a flight to Frankfurt that begins at your local airport, you book the flight from Chicago to Frankfurt. Then, you look for the absolute lowest price you can find from your airport to Chicago.

Let’s say you find a roundtrip deal between your city and Chicago for $200. It’s not on the same airline as you plan to fly from Chicago to Frankfurt, but that’s okay. The goal is to find the lowest rate possible. While you’re spending $200 per passenger for the roundtrip deal to Chicago, you’re saving $600 by booking the direct flight from Chicago to Frankfurt, leaving you with a net savings of $400 per passenger.

Risks of positioning flights

Opting for a positioning flight on a different airline than you plan to take to Frankfurt is not without risks, including:

Missing your connecting flight. Say a storm blows in, and your short flight cannot take off as expected. Regardless of the reason, if you can’t get to Chicago in time to make your flight, neither airline is responsible for issuing you a refund.You’ll have to pick up your luggage twice. Because you’re flying two different carriers, your checked luggage must be picked up and rechecked when switching to your connecting flight. If there’s a luggage fee, you may end up pulling your travel credit card out to pay the fee twice.

How to find the lowest rate on a positioning flight

In its “How to Find Cheap Flights in 2023: The Ultimate Guide,” the deal-finding site Going offers excellent advice to anyone looking for an inexpensive flight.

Look in the right places. Most folks can find what they’re looking for by checking out Google Flights, Priceline, Momondo, or Southwest. You’ll notice that you need to check with Southwest directly, as information regarding Southwest flights is not available through flight search engines.Be flexible. Going points to a feature of Google Flights that is particularly handy: the ability to move your departure date to see if you can find a lower price.Don’t forget to check Southwest. Even if you see some fairly sweet fares on other sites, Going suggests checking Southwest.com for cheap domestic flights. The Southwest Low Fare Calendar quickly shows you which days are cheapest for the route you want to take.

The order in which you book flights is up to you, but continuing with the Chicago to Frankfurt illustration, here’s one way to do it.

Once you’ve found a great fare to Frankfurt, either book it right away or put a pin in it long enough to find a positioning flight. If you do book it, make sure you understand the airline’s cancellation policy, just in case you can’t find a cheap positioning flight.Search for the cheapest flight between your airport and Chicago.Once you’ve found a cheap rate you’re happy with, book it.If you’re concerned about missing your flight out of Chicago, consider arriving much earlier in the day or even the day before. That way, you get a chance to spend a little time in the city, and you can relax about missing your flight.

Most people would love to travel but don’t want to empty their savings accounts to do it. Positioning flights is a good way to see the world without hitting your personal finances too hard.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Dana George has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.

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Insurance can protect you from financial peril, but at a cost. Bundling not only saves money but also provides these surprising perks. 

You’ve probably heard that bundling your auto and home insurance will save you money, but do you know how much you can save? Typically, the discount is at least 5%, with some companies rewarding you with a discount of up to 25%. That discount represents a significant chunk of money you can divert to an emergency savings account or other financial need. However, there are more advantages associated with policy bundling than how much you’ll save. Here, we examine a few.

What is policy bundling?

Policy bundling refers to purchasing multiple policy types from a single insurance company. For example, if you purchase auto and homeowners insurance from the same company, you’re bundling. To thank you for buying more than one policy, insurance companies typically offer a discount. While that discount can be quite sweet, it’s not the only incentive to bundle.

1. Convenience

Chances are, you have a fair number of bills to juggle each month. One of the biggest perks associated with bundling is the fact that one company becomes your one-stop shop for all things insurance. In fact, if you don’t yet have a life insurance policy, you can ask your agent about adding an inexpensive term policy to your bundle.

Now, instead of keeping track of several different insurers, you know that everything is under one roof. If you have any questions, you have one agent to call. If you have any concerns, you know where to turn. Bundling makes managing your policies easier.

2. Fewer agents to deal with

This second perk is a gem. If you’re someone who dislikes working with salespeople, find an insurance agent you like, check out their company, and imagine dealing only with them. Once you’re settled with a company, and your policies have been bundled, you have someone you trust to turn to when an issue arises.

Anyone who’s ever experienced an emergency situation recognizes how comforting it can be to see a familiar face and know that person is there to handle their insurance needs. Imagine that your car has been totaled, but you managed to escape unharmed. Still, you’re shaking and not sure you’re thinking clearly. As you wait, you give your auto insurance company a call, and within 20 minutes, your agent is on the scene.

When all your policies are handled by a single agent, that person is likely to be more invested in any case involving you.

3. Less likely you’ll be dropped

Let’s say you have a teenage driver who is involved in their second fender bender of the year and receives a traffic violation. It’s within an insurance company’s rights to drop you as a policyholder or to choose not to renew it when the time comes. However, since you have multiple policies with the same company, the company views you as a dependable customer and is less likely to drop you.

4. You may be able to combine deductibles

According to the National Association of Insurance Commissioners (NAIC), some insurance companies offer combined deductibles. If your insurance company offers combined deductibles, it means that you only have to pay one deductible when both losses are caused by the same event.

For example, if a tornado were to damage your home and car, you would not have to pay a deductible toward the repair of each. Instead, you would pay one deductible.

If bundling sounds good to you, ask your insurance agent about bundling all your insurance needs, from renters insurance to boat and motorcycle coverage. You’ll not only save money, but you’ll simplify your life.

Our best car insurance companies for 2022

Ready to shop for car insurance? Whether you’re focused on price, claims handling, or customer service, we’ve researched insurers nationwide to provide our best-in-class picks for car insurance coverage. Read our free expert review today to get started.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Should you split your travel purchases into several installments? Here are the pros and cons to consider. 

Buy now, pay later, or BNPL, plans have become extremely popular in recent years, to the point where it’s rare to find an online merchant’s checkout window that doesn’t offer some sort of BNPL option. This is especially prevalent in situations where purchase prices tend to be high, such as travel. And while it can be tempting to split an airline ticket, hotel stay, or cruise vacation over a series of installments, it isn’t always a good idea for your personal finances. Here’s a look at some of the benefits of BNPL plans to pay for travel, as well as some of the drawbacks to keep in mind.

1. No interest in many cases

Some buy now, pay later plans are interest free, and the merchant pays a fee to the BNPL lender for providing the financing. This is especially common when you split a purchase into a small number of installments, such as Affirm’s Pay in 4 BNPL option.

However, even with 0% financing, be aware that you can get hit with fees and/or interest if you miss a BNPL payment, and these can be rather high in some situations. And not all BNPL plans are interest free — some have interest rates as high as 36.99%.

2. Easy qualification

Several buy now, pay later services don’t perform credit checks as long as you have a verified bank account. Others use a soft credit pull, so applying doesn’t affect your credit score, and a hard credit check is typically only used in cases where you make an especially large purchase, or you choose a long repayment term. And even if a BNPL service does check your credit, the qualification standards are typically rather low compared with applying for a new credit card.

3. Equal monthly payments

Splitting a purchase into equal monthly payments or at other intervals that coincide with when you get paid can make it easier to budget for travel. For example, splitting a $500 airline ticket into five equal $100 installments can automate the repayment process and make it easier to fit the purchase into your budget.

You can theoretically do this with a credit card, but it isn’t automated (although some credit cards have been rolling out “pay in installments” features for larger purchases).

Some downsides of BNPL for travel

Like most financial products, buy now, pay later plans aren’t ideal for all situations. For example, BNPL programs don’t earn rewards like some of the top travel credit cards do. There are cards on our top travel credit card list that offer 0% intro APRs for well over a year and have excellent reward earning rates on purchases.

Plus, while some BNPL services don’t do a hard credit pull, the caveat is that many also don’t report your payment history to the credit bureaus. So, if you make your payments on time every month, it might not help you build credit. It is especially common among BNPL services that split purchases into a small number of installments to not report activity to the credit bureaus.

Finally, BNPL can make it easy to get in over your head on purchases. The same can certainly be said with a credit card, but at least you’ll get a running total of the purchases you’ve made and how much you owe. Each BNPL purchase is often treated as a separate account, and it can be easy to lose track of how much you’re spending.

The bottom line

Like any financial product, buy now, pay later plans can be a valuable financial tool when used correctly. Just be sure that you understand the pros and cons, as well as the potential complications of using BNPL for too many purchases, before you decide to proceed.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Matthew Frankel, CFP® has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Hundreds of thousands of vehicles are donated each year. Find out why. 

If you itemize deductions on your tax return, you can claim a deduction for any charitable giving you’ve done throughout the year. This doesn’t just include money — if you donate property, you can take a deduction as well. Many people choose to donate bags of old clothing, but there has been a surge in donating vehicles to charities in recent years. In fact, more than 700,000 vehicles are donated annually in the United States.

Donating your car is a win-win situation for both you and the charity you choose to receive it. And there are a few reasons why.

Tax deductions

The obvious reason to donate your car is to get a tax deduction. If you donate your vehicle, you can deduct the amount of money that the charity sells your car for (you’ll get a receipt) or its fair market value in certain circumstances. Plus, you won’t be paying auto insurance on an unneeded vehicle.

One key thing to keep in mind is that the amount you’re allowed to deduct could easily be greater than your car’s trade-in value. If the charity sells your car, it usually does so at an auction. And if the charity keeps the car, sells your car at a discount (to a family in need, for example), or makes substantial improvements before selling it, you can use the vehicle’s fair market value (FMV) from Kelley Blue Book or a similar source.

One tip is if you want to maximize your tax deduction and have a working vehicle, ask the charity if it plans to use it. Some — such as the Salvation Army — often use donated cars or give them away to families in need. Fair market value is almost always higher than what your car will sell for at auction.

In simple terms, instead of trading your car in to a dealer and getting significantly less than the vehicle’s market value, you can donate it and potentially get a tax deduction for a significantly higher amount.

Convenience

You could certainly sell your vehicle yourself, but donating it to charity eliminates the hassles involved. You won’t have to list the car for sale or meet potential buyers and deal with test drives and negotiations. Many charities that accept cars will even pick it up for free or arrange for towing. If you need the car gone and don’t have much time, donating it is a good option.

Leave your savings alone

If you donate a vehicle, you can get a nice tax deduction and help a cause you care about without dipping into your savings account. Plus, the charity gets a very nice payday — after all, in most cases a working vehicle is worth more than the donor would likely give to the charity if they were donating cash.

Make sure you donate your car the right way

I recently wrote an article that provided detailed steps to ensure that if you donate your car, you won’t run into problems later when you try to take a tax deduction for it. I’d suggest reading it before you donate, but the main ideas are:

Make sure you donate it to a qualified charity (directly, not through a third-party intermediary business).Sign the vehicle’s title over to the charity — don’t leave it blank.Remove the vehicle from your auto insurance after you sign it over.Find out if the charity plans to use your vehicle or sell it, as this determines the value of the deduction.Get written documentation from the charity acknowledging receipt of the vehicle.Complete the right tax form with your tax return.If the vehicle is worth more than $5,000, get an independent appraisal.

There are some excellent reasons to donate a used vehicle to charity (even if it’s in bad shape). Make sure you follow the correct steps so you can take full advantage of the deduction to which you’re entitled and be sure to consult an experienced tax professional if you have any questions during the process.

Our best car insurance companies for 2022

Ready to shop for car insurance? Whether you’re focused on price, claims handling, or customer service, we’ve researched insurers nationwide to provide our best-in-class picks for car insurance coverage. Read our free expert review today to get started.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More