Brace yourself: Inflation is coming for your car insurance

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In 2020, at the start of the COVID-19 pandemic, many Americans were pleasantly surprised when car insurance companies began issuing refunds on insurance premiums. More people staying home meant fewer claims, so insurance companies refunded premiums for their customers across the board.

But those refunds stopped as people began returning to pre-pandemic levels of activity and, in 2022, some drivers are seeing steep increases in their car insurance rates. The reason for these increases isn’t just that Americans are back on the roads — there’s actually a few different reasons why you might get hit with a car insurance rate hike this year.

Inflation is on the rise

According to American Property Casualty Insurance Association Vice President Bob Passmore, “consumers are experiencing strong upwards pressure on insurance rates,” thanks to “the fastest rise in inflation since the 1980s, rising auto insurance losses and supply chain disruptions, particularly for critical auto parts, along with labor shortages and other escalating costs.”

Inflation is affecting the cost of many commodities, including energy. The impact of inflation on the cost of doing business is significant, and car insurance companies are just as affected as everyone else.

The cost of renting office space, heating and cooling that office space, and providing computers and other electronics for employees has gone up significantly, and consumers are seeing those costs reflected in their annual insurance rates.

Supply chain disruptions

The automotive industry has also been especially hard hit by supply chain disruptions related to the COVID-19 pandemic.

Wuhan, the city that was the epicenter of the COVID-19 outbreak, is a major manufacturing hub for multiple car companies, including Volkswagen, Toyota, and General Motors. When Wuhan shut down for quarantine in 2020, production on vehicle parts stopped and suppliers in China warned their customers that they would be unable to deliver orders for the foreseeable future.

Production has picked back up since the initial quarantine, but the delay caused problems for people in every corner of the automotive industry. According to recent research, more than 50% of repair shops have said they are still dealing with frequent disruptions in their supply of auto parts, and 100% of repair shops say it is taking longer to complete vehicle service and repairs.

These supply chain issues are making it more expensive to buy or repair a vehicle, which means insurance companies have to pay more for claims to repair or replace your car after an accident — and insurance companies are passing those costs along to the consumer.

Missing microchips

One of the biggest supply chain issues in 2022 is in semiconductor chip manufacturing. While we may not think about them much, microchips serve as the brain for most modern electronic devices, and the number of electronic systems in modern cars continues to go up.

Entertainment systems, rearview cameras, emission control systems, and built-in navigation systems are just a few of the places where newer cars rely on microchips.

When COVID hit, microchip production stopped. That’s because the microchip manufacturers suffered from the same problems as every other industry, with quarantines and sick employees slowing down their ability to produce chips at their previous rate.

This was less of a problem when people weren’t buying cars, but the drop in car sales was only temporary, which meant drivers who otherwise might have purchased a new car didn’t have that option and were forced to purchase a used car instead.

In January 2021, Congress passed the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act. This act was designed to promote the research, development, and creation of semiconductor chips in the U.S., but disagreement among political leaders on how to fund it means the domestic manufacturing of microchips hasn’t started yet.

The lack of microchips means new cars aren’t being produced the way they were before the pandemic, and the reduced supply of vehicles has caused the price of cars to go up contributing to those higher costs for car insurance companies, which have to pay out more to repair or replace a vehicle.

The used car price boom

Supply chain disruptions have also led to fewer new cars being available, which means the value of used cars has gone up significantly.

According to Michelle Krebs, an executive analyst at Cox Automotive, the company behind Kelley Blue Book and Autotrader, “Used-vehicle prices have been rising for the past year or so. They currently are running about 24% ahead of a year ago. In our most recent data, the average list price for a used vehicle surpassed the $28,000 mark, a record level it hit in December 2021”

So why does this matter for car insurance? The value of your car plays a big part in setting your car insurance rates. If the value of your car goes up, the cost to repair or replace your car goes up as well, increasing the amount the insurance company will have to pay out for a collision or comprehensive claim.

Also, your car insurance pays for any damage you cause to another person or their property in an accident. The more their car is worth, the more your insurance company will be expected to pay out on a property damage claim.

Inflation, supply chain issues, and the increased value of used cars are all contributing to a noticeable increase in car insurance rates across the country. Drivers who haven’t yet renewed their insurance policies for 2022 should be prepared for their rates to go up, potentially a lot.

This article originally appeared on Policygenius.com and was syndicated by MediaFeed.org.

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9 smart investments to hedge against inflation

 

It’s no secret that inflation has arrived and is here to stay. To protect yourself from the adverse effects of inflation, it’s essential to invest your money in smart ways.

 

 

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A few things can cause inflation, but the most common is when the government prints more money than there is demand for. Printing more money causes the value of each dollar to go down, and it becomes more expensive to buy goods and services.

 

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Inflation can have a lot of adverse effects on the economy. When the value of money goes down, people tend to hold onto their cash instead of spending it.

 

Not spending money can lead to a decrease in demand, which can cause businesses to lay off workers or even go out of business.

 

 

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Inflation can also affect asset values. A decrease in the value of money can lead to a decrease in the value of these assets. For example, when the value of money goes down, it can be more expensive to buy stocks and other investments.

 

 

marchmeena29 / istockphoto

 

There are a few things you can do to protect yourself from inflation. One is to invest your money in assets that will maintain their value over time. Another is to keep up with current events and make sure you know how inflation affects the economy. Finally, make sure you’re not taking on too much debt, as inflation affects this.

 

Here are nine investments that can help you protect your savings from inflation.

 

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TIPS, or Treasury Inflation-Protected Securities, are a type of bond issued by the U.S. government. The value of these bonds increases as inflation rises, so they can be a great way to protect your money from the harmful effects of inflation.

 

The downside of investing in TIPS is that they tend to have a low yield, so that you won’t earn a lot of money on your investment. However, the security of knowing your investment is protected from inflation makes them a wise choice for anyone looking to shield their money from rising prices.

 

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Bonds are another investment that can help you protect yourself from inflation.

Bonds can be a great way to make sure your money is safe and will maintain its value even if inflation rises. When you buy a bond, you’re lending money to a government or company in exchange for regular interest payments over a set period of time.

 

The downside of investing in bonds is that they can be risky if the company or government you’ve lent money to goes bankrupt. So, it’s essential to do your research before investing in bonds and know exactly to whom you’re lending money.

 

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Gold is a popular investment during times of inflation, as it tends to hold its value even when the dollar falls. The preservation of its value makes gold an excellent option for anyone looking to protect their money from price fluctuations.

 

The downside of investing in gold is that it can be expensive, and there’s no guarantee that the price will go up over time. So, it’s essential to do your research before buying gold and make sure you’re comfortable with the risks involved.

 

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Real estate is another asset that often performs well during times of inflation. When prices rise, people tend to invest in real estate to earn a higher return on their investment. The earning potential can make real estate a wise choice for anyone looking to shield their money from inflation.

 

The downside of investing in real estate is that it can be risky, and it can take a long time to see a return on your investment. So, it’s essential to do your research before buying property and make sure you’re comfortable with the risks involved.

 

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Commodities are items like gold, silver, oil and wheat used as investments during times of inflation. They are used as investments because they tend to hold their value even when the dollar falls.

 

The downside of investing in commodities is that they can be volatile, and it’s difficult to predict how prices will change over time. So, it’s essential to do your research before buying commodities and make sure you’re comfortable with the risks involved.

 

NiseriN / iStock

 

Mutual funds are a type of investment that allows you to invest in various assets, including stocks, bonds, and commodities. Mutual funds can be a great way to spread your risk and protect your money from the adverse effects of inflation.

 

The downside of investing in mutual funds is that they can be expensive, and it can take a while to see a return on your investment. So, it’s essential to do your research before buying into a mutual fund and make sure you’re comfortable with the risks involved.

 

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Stocks are another option for protecting yourself from inflation. When you buy stocks, you’re investing in shares of a company. Investing in these shares means that you become part-owner of the company and stand to earn dividends if the company does well.

 

The downside of investing in stocks is that they can be risky, and it’s difficult to predict how prices will change over time. So, it’s essential to do your research before buying into stock and make sure you’re comfortable with the risks involved.

 

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Silver is a type of commodity that often performs well during times of inflation. Silver performs well because it tends to hold its value even when the dollar falls.

 

The downside of investing in silver is that it can be volatile, and it’s difficult to predict how prices will change over time. So, it’s essential to do your research before buying into silver and make sure you’re comfortable with the risks involved.

 

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Floating-rate bonds are a type of bond that has a variable interest rate. Having a variable interest rate means that the interest rate will change depending on how the economy is doing.

 

The upside of investing in floating-rate bonds is that they offer a higher return than regular bonds and are less risky than stocks or commodities.

 

The downside of investing in floating-rate bonds is that they can be volatile, and it’s difficult to predict how prices will change over time. So, it’s essential to do your research before buying into a floating-rate bond and make sure you’re comfortable with the risks involved.

 

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Inflation can be a severe threat to your financial security. However, by investing in the right assets, you can protect yourself from its adverse effects. So, before you invest your money, make sure you understand how inflation can impact your portfolio and choose investments that will help you stay ahead of the curve.

 

This article originally appeared on MaxMyMoney.org and was syndicated by MediaFeed.org.

 

 

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