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Will Trump's tariffs make your car insurance more expensive?

Mediafeed logo Mediafeed 7/19/2018 Myles Ma
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A White House proposal to raise taxes by up to 25% on imported auto parts would lead to higher costs for auto repairs and auto insurance, representatives from the insurance industry say.

The Trump administration is investigating whether auto imports are a national security threat and considering raising tariffs on foreign cars and parts. This will hurt consumers, said the American Insurance Association, the National Association of Mutual Insurance Companies (NAMIC) and the Property Casualty Insurers Association of America (PCIAA) in a joint comment on the proposal.

How will tariffs affect your wallet?

About 60% of auto parts used in the U.S., whether for repair or assembly, are imported, based on industry estimates. Insurers estimate a 25% tariff would increase the cost of auto repair claims by 2.7%.

This increase could lead to personal auto insurance premiums rising by $3.4 billion, insurers estimate.

There aren't always domestic alternatives for imported auto parts, said Robert Passmore, assistant vice president of personal lines policy for PCIAA. Automakers build parts specifically for specific cars.

They can't just flip a switch and start making parts in the U.S., Passmore said. Even companies that assemble automobiles in the U.S. often source parts from other countries.

"You have to go through the whole process and set up manufacturing somewhere else," he said.

Tariffs could lead "hundreds, if not thousands," of insurers to request rate increases, the insurance groups said. Higher prices for parts will increase the likelihood that a vehicle is declared a total loss, which could also lead to more costs for consumers.

Even thefts could increase because of more expensive parts, the insurance groups said.

"Motor vehicle theft rates could rise, as many stolen vehicles are sold for their parts," they said.

The Commerce Department expects to analyze the potential impact of the tariffs and report to the White House within a couple of months, Reuters reported. There are a number of ways in which tariffs in general can affect your money

How to avoid paying more

Regardless of what happens, there are ways to control auto insurance costs, said Neil Alldredge, senior vice president of corporate affairs for NAMIC. Shopping around is one.

"Most states have literally hundreds of insurance companies competing against each other," he said.

Many consumers don't regularly shop for auto insurance and could be missing out on better deals, Alldredge said. (It helps to know how to read an auto insurance quote as they are often confusing.) 

Another way to avoid costly auto repairs: Drive safely. Avoid texting and driving or drinking and driving and other dangerous behaviors.

Talk to your insurer about lowering your deductible, Alldredge said. Your deductible is how much you're expected to pay before your policy pays out. The higher your deductible, the lower you'll pay in premiums.

Just make sure you have enough savings to cover a higher deductible if you end up making a claim.

Buying an American car won't help, since many parts may come from overseas, but the car you drive can affect the price of your insurance. Driving a new $85,000 car will cost more to insure than a 2-year-old $30,000 car, Alldredge said.

In any case, if you've been putting off necessary work on your car, you may not want to put it off much longer.

Wondering why your car insurance went up even without tariffs? It could be for one of these seven reasons.

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

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