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When the market slumps, you could find your premium dropping due to lower car value and decreasing demand for add-ons. But if you decide to scale back coverage for other financial issues related to a recession, make sure you have enough protection to avoid paying for accident damage on your own.
How does car insurance change after a recession?
During an economic downturn, many people start cutting costs where possible, including car purchases and insurance coverage. Eventually, companies may respond by offering lower premiums to meet the lag in demand. This may result in:
Reduced coverage. Customers looking to save money up front may lower the amount of coverage on their policies. If they go too far, they could get stuck with out-of-pocket expenses or, even worse, consequences for driving uninsured. And watch out for the possibility of more underinsured drivers on the road.
Insurance payouts. Reduced premiums mean companies have less in store for insurance payouts. No matter how they choose to handle that problem, the solution could include closer scrutiny of claims or other business changes that affect customers.
Insurance benefits. As everyone scales back, you might see your insurer scale back on customer benefits and programs that once saved you a pretty penny. A perk like accident forgiveness or roadside assistance might not be free anymore.
How much does a recession affect car insurance rates?
Overall, you can expect rates to decrease alongside some people’s decreased incomes and tightened budgets. Car-related factors that might get influenced by a recession include:
Car value. A recession could make your used car less valuable due to price cuts on newer models. If insurers think your car is worth less, you could see decreased premium due to repairs being cheaper after an accident.
Credit. Since banks typically tighten credit lines during this time, people may have a harder time establishing good credit, which could affect insurance rates in the long run.
Coverage. You might opt for bare-bones coverage to save money. Just be sure you have enough to protect you financially if an accident happens.
Job loss. If you’ve experienced a job cut, you may need low-cost insurance for a limited income. Choose less coverage, a cheaper provider or state programs if you live in California, Hawaii or New Jersey.
Compare car insurance after a recession
Get cheap car insurance after a recession
Although premiums may be going down all around, you can still take extra steps to save:
Shop around. Some companies take a financial hit better than others. Consider shopping around again to make sure you’re getting the best value post-recession.
Maintain healthy credit. Keeping a high credit score may work in your favor throughout the recession, including low insurance rates and easier car purchases.
Keep a clean driving record. Safe drivers may get the best deal of all for their spotless records — spelling fewer claims for insurers.
Qualify for discounts. Take advantage of all rewards available, including safe driver discounts, safety course completion and bundled policies.
Low mileage rates. Saving by sticking close to home for recreation? Your low annual mileage could qualify for a lower premium with a standard or pay-as-you-go policy.
Reduce coverage, if you can. Can you deal without coverage like medical payments, original parts or better car replacement? This could sink your premium even lower than before.
How do I update my car insurance after a recession?
During a recession, you could allow the market to automatically lower rates at your next renewal period. However, follow a few steps to update your coverage or go with a new provider right away:
Reconsider your coverage needs, including your limits, deductibles and add-ons. If you’re shopping around, get quotes from several providers.
Add or drop coverage with your insurance company by phone or through your online account.
If applicable, start your new policy application, providing personal and vehicle details.
Save your information and receive your new rate. For a new policy, finalize details, enter payment and start the policy.
Bottom line
A recession often means tightened finances, leading people to question every expense, including car insurance coverage. You can make sure you have adequate protection while finding ways to save at the same time.
Frequently asked questions about car insurance after a recession
You might consider a liability-only policy if you have a limited income or are insuring an old vehicle. However, consider the benefits of getting coverage like collision or uninsured or underinsured motorist, especially if you don’t have financial means to replace your car out of pocket. Also, you might need to ensure other coverage isn’t required by your state, lender or leasing company.
If you drive the car at all on public roads, you do need it to have insurance and get registered. However, you could consider seasonal or storage insurance, which lowers coverage to bare minimums like comprehensive coverage for a specific time.
In general, sedans, minivans and CUVs are the cheapest body types to insure. Insurance companies may take into account your car’s size, theft rates, engine power and safety ratings when determining your rates.
Sarah George is a writer at Finder who unravels complicated topics about insurance, business and finance. She's been wordsmithing for nearly five years, after earning an English education degree. Her insurance know-how has been featured on CarInsurance.com. You can usually find Sarah sipping hot tea and talking through movie plots in her downtime.
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