Tariffs: The Impact on Car Insurance Costs

If you’ve been hanging out with us here at our blog for a while, you’ll know we’ve been closely following what’s going on with the recent import tariffs. Why? Because they directly affect just about everything automotive related. And you know that here at eTags, automotive is what we do.

So far, we’ve addressed the issues of foreseeable (and current) hikes in car prices due to the new import taxes. But one item we have yet to talk about is the tariffs’ impact on auto insurance. The question on our minds is:

Will the tariffs have any impact on car insurance costs?

To begin with, we have to admit that no one can predict the future, let alone give an exact number of any possible expenses. However, it does seem likely that the tariffs could lead to an increase in insurances costs. Simply put: it’s not just the vehicles themselves that are being imported at higher costs, but the parts and tools necessary for repairs as well.

Let’s explore a bit and see how these duties trickle down to the insurance level, shall we.

Wait, what is a tariff, and how does it apply to the automotive industry?

For a quick recap, a tariff is basically a tax or duty imposed on imported goods. So in the case of the automotive industry, the manufacturer – say Toyota or Honda or Ford – would have to pay much higher taxes on parts, tools and vehicles being brought into the US from foreign countries. And because no one wants to eat this cost alone, the extra expense is passed onto dealerships and ultimately to the customer. In short, tariffs affect nearly anyone involved in the production or purchase of a vehicle with parts or its entirety coming from distant shores.

How exactly could raised import fees affect car insurance rates?

In terms of insurance, let’s create a scenario. Say your vehicle was involved in an accident and needs repair.  Maybe you need a new headlight or a new side mirror or a replacement bumper. If these parts are made in a country who is subject to the new tariff rates, the cost of importing these things will be higher than in the past. Materials such as steel, aluminum, glass, and plastic will all be imported at a costlier rate. This means that dealerships and mechanics will face heftier bills when ordering these parts for customers. So then the repair itself becomes more costly. And if insurance companies want to stay in business, they will likely need to increase their fees to cover the hike in costs that they are swallowing.

And as a result, the U.S. has seen an increase in car insurance rates across the country. Whether or not you’re driving a car with foreign parts, the likelihood of a larger insurance bill seems inevitable.

It’s not great news, we know. But as they say: forewarned is forearmed.

What can I do to mitigate the rising car insurance premiums?

Here are some steps you can take to help soften the blow of an auto insurance cost hike:

1. Shop for Better Rates. Not all insurance companies seem to be affected in the same way. Some companies are still offering competitive rates despite the pressures of the current market, so it pays to shop around.
2. Enhance Your Safety Profile. Upgrading safety features in your vehicle or taking defensive driving courses can, in some cases, help lower your insurance premium. Because these actions reduce the risk of accidents, they are looked on favorably by insurance companies and are often rewarded with discounts.
3. Opt for a Bundle. Many insurance providers offer lower package rates if you bundle different types of insurance, such as auto and home, which may help to counteract tariff-induced increases.