If You Do One Thing This Year, Review Your Car Insurance -- Here's Why

Most people have a lot of fun plans for the upcoming year -- and reviewing car insurance coverage probably isn't on that list. It should be, though.

While taking a close look at auto policies sounds about as exciting as watching paint dry, it is something absolutely every motorist should do this year. Here are two big reasons why that's the case.

1. Car insurance prices have skyrocketed

The single biggest reason every driver needs to review their auto insurance coverage is because prices are through the roof.

The cost of auto insurance rose six times faster than overall consumer prices last year, far outpacing inflation and leaving many consumers facing much higher bills. With prices on premiums for a full-coverage policy up as much as 24%, many people will see premiums in 2024 that are hundreds of dollars higher than they were paying in recent years.

Paying so much for car insurance is not fun. And it's especially important not to overpay when prices are so expensive already. To make sure that coverage is as affordable as possible, some key steps to take include:

• Shop around for coverage. Insurers actually charge higher premiums for customers who they think won't shop around. So those who are being loyal to an insurer could pay a price for it. Get at least three online quotes to find the best deals.
• Ask about discounts. Insurers offer discounts for a whole variety of different things, from having safety devices installed on a vehicle to good grades for teens to being a member of certain organizations or working for certain employers. Be sure to ask to get all of the available discounts.
• Take a defensive driving course. Insurers offer discounts ranging from around 5% to as high as 20% for those who complete a defensive driving class. It's worth looking into how much it's possible to save for a few hours taking a course learning to be a better driver.
• Keep your insurer updated on life changes. Things like getting married or switching to a job with a shorter commute could result in lower premiums.

Reviewing a policy to explore these options -- and getting several quotes on coverage -- could help drivers to keep costs down despite the surge in insurance prices.

2. Used car values are falling

After skyrocketing during the post-pandemic years, the price of used cars is starting to come down, with the average list price 3% lower than it was last year.

While this is good news for consumers shopping for vehicles, the falling prices increase the chances that those who own cars may not be able to sell them for the full amount necessary to pay off any outstanding auto loan balance. This is especially an issue for people who bought at the peak of the market when there was a vehicle shortage and people were paying above sticker price for cars.

Those who owe more than their car is worth could find themselves having to pay off their loan out of pocket if their car is stolen or is declared a total loss in an accident. That's why it's important to review a policy to make sure gap insurance coverage is included. Gap insurance doesn't cost a lot -- around $20 to $60 per year for most people -- and it pays off any balance that remains in a loan once the insurer pays the fair market value of the vehicle.

Drivers need to review their insurance policies to make certain they have gap coverage if there is a chance their car is worth less than they paid to avoid huge losses out of their bank account in the event of an accident.

So, those who want to avoid huge premiums or high out-of-pocket losses should take a close look at their car insurance coverage this year. Do it now, before any money is lost and it's too late to get it back.