2008 sees record cost increases for car insurance

Insurance.com RateWatch reports that 2008 marked the biggest jump in car insurance rates in five years, with an annual increase of 8% over 2007, according to a new study.

Overall car insurance rates rose from $1,810 at the end of 2007 to $1,954 in 2008. This was the first year that rates were on the rise since 2003, adding to the many financial challenges already facing consumers throughout 2008.

RateWatch data from the fourth quarter (October-December) shows the lowest car insurance quotes, on average, were up $5 over the previous quarter, rising from $1,949 per year to $1,954 per year.

Among the top 10 states seeing the sharpest increase in car insurance rates in the 4th Quarter were Washington, D.C. (up 10.5%), Utah (up 10.2%), Colorado (up 6.1%), Delaware (up 5.6%), and Wyoming (up 5.5%). Rates are starting to fall or at least increase more slowly in the West and Southeast.

“The rate increases throughout 2008 were ill-timed for consumers, who are struggling to pay bills or are facing serious financial difficulties,” said Sam Belden, vice president of Strategic Alliances at Insurance.com. “We’ve seen an alarming number of customers seeking to re-instate policies that had lapsed due to financial hardships. This marks the beginning of a worrisome cycle when it comes to auto insurance, as declining credit scores and bankruptcy filings make it much more expensive for drivers to get coverage, and harder to find an insurer willing to cover them.”

Insurance.com also advised people to compare several companies before buying car insurance. According to an Insurance.com study, insurance shoppers saved an average of $595 when they shopped and switched carriers.

Insurance.com is a leading online independent auto insurance agency in the United States.