High Gas Prices May Lead to Lower Insurance Costs

A late-June study by the Consumer Federation of America (CFA) revealed that many American drivers are unaware of the fine print in their own insurance policies. As consumers have made major changes to driving habits-walking or biking to work, avoiding long trips, and consolidating errands-they have inadvertently qualified themselves for lower insurance rates. The problem is, many of them don’t know it.

The study points out the obvious-insurance rates are directly correlated to risk of accident, which is directly tied to how often and how far a vehicle is driven. It’s simple: the fewer miles and hours a vehicle spends on the road, the less likely it is that it will be involved in an accident. This reduced risk logically leads to less exposure by the insurer-which can be passed on to the consumer in reduced rates. The study outlines a couple of specific ways in which many Americans have changed their driving habits, unwittingly qualifying themselves for lower rates.

Many drivers have simply stopped driving, period. The number of people in urban (or even rural) areas who walk, bike, or take public transportation to work has seen drastic increases that correlate to increased fuel costs. By doing so, these auto owners have moved their vehicles from a “Work Vehicle” to a “Pleasure Vehicle” classification-which can be up to 15% less expensive in terms of insurance premiums.

Consumers who still drive to work have made other modifications, joining carpools or driving smarter, working their errands into their daily trip to and from work, rather than getting back out of the house at night. Although these are still classified as work vehicles, many now fall into a lower annual mileage category, often resulting in savings of up to 10%.

Consider the case in Florida, where the average driver spends over $830 yearly on auto insurance. A five to fifteen percent rate reduction works out to yearly savings of up to $125. That certainly doesn’t completely offset higher fuel prices, but it helps-it’s a car payment for many people, or equivalent to the cost of two tanks of gas.

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