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Understanding How Oil Prices Impact Auto Insurance in Florida

Sep 06, 2023

When people think of Florida, some of the things that come to mind are beautiful coastlines, warm breezes, picturesque landscapes, gorgeous sunsets, and a wide variety of attractions and theme parks to enjoy. While all of that is true, Florida also has the most unfavorable gas prices in the country according to a report by the AAA.

Gas prices typically rise slightly around holidays, but 2023 is different. The price is not decreasing in Florida, even though local residents have gone back to their normal daily routines and are no longer driving as much. Normally, this would result in lower gas prices. Instead, in the week after the holiday, the price of gas rose 11-cents per gallon according to an article written by Andrew Gross, Manager of AAA Public Relations, and Devin Gladden, on the AAA Newsroom website.

Mr. Gross says the hike comes, in part, as a result of potential interest rate increases in the near future. Also, as oil is the main ingredient in gasoline, the increasing price of crude is continuing to increase the price at the pump. Let’s take a look into how oil prices impact the cost of auto insurance rates for Floridians.

How do oil prices impact auto insurance rates in Florida?

Believe it or not, there is the connection between the price of oil and automobile insurance rates in Florida. According to the Florida Highway Safety and Motor Vehicles website, every registered vehicle (even if it is not being used) must have automobile insurance. Florida requires that the person in whose name the vehicle is registered must prove they have purchased Personal Injury Protection (PIP) and Property Damage Liability (PDL) insurance coverage. This is mandatory and a vehicle will not be registered without it. When financing an automobile, it’s important to know that most lenders require additional insurance. This is known as “comprehensive” coverage, which will insure against risks such as accidents, theft, and other unforeseen incidents that might damage the vehicle being financed. Many residents opt for this insurance, as well.

So, how does oil impact insurance rates? Oil is a key ingredient in many products we use on a daily basis. High oil prices directly contribute to inflation by increasing the overall cost of everything. Insurance is no exception. Since insurance is mandatory in Florida, these increases affect every policyholder in the state.

Can fluctuations in oil prices affect the cost of auto insurance for Florida residents?

Insurance rates are directly affected by the number of drivers on the road and the frequency of accidents in the state, while fluctuations in the price of oil have an indirect effect.
When oil prices are low, it can mean more drivers on the road, hence, more accidents. An increase in oil prices means an increase in the cost of services, which means insurance companies are paying more for repairs, parts, and/or medical services. In this case, the insurance company doesn’t have many choices if they want to stay in business. Therefore, like every other business, they must pass the increased costs on to their customers, in the form of higher premiums or higher deductibles.

How quickly can changes in oil prices impact the auto insurance market in Florida?

It happens fast! The auto insurance market is known for its adaptability and responsiveness to a hike in oil prices and other external factors. Insurers are very aware of any number of markets, including oil, and their experts spend time analyzing data and market trends to swiftly make any necessary adjustments.

How does the price of crude oil impact the overall cost of owning a car and, consequently, auto insurance rates in Florida?

The price of crude oil impacts car ownership in a variety ways. When oil prices increase, it results in an increase in the cost of fuel, which affects a driver’s budget. Manufacturing expenses, transportation costs, and the demand for vehicles also increase exponentially.

Insurers have a difficult task in managing risk and calculating premiums for auto insurance. Florida drivers do have a few options. They might choose to change their vehicle usage or seek alternate modes of transportation. Maybe walk to a nearby destination instead of taking the car? Exercise and saving money at the same time can’t be a bad thing!

In conclusion, insurance companies are able to adapt quickly to constantly changing oil prices so they can offer competitive automobile insurance rates to Florida residents.

One of the preeminent insurance providers in the state is Del Toro Insurance. They’re currently serving the following locations: Hialeah Gardens, FL, Margate, FL, Homestead, FL, Palmetto Bay, Cutler Bay, Hialeah Gardens, FL, North Miami Beach, Coral Gables, Hialeah, FL, Naples FL, and Miami, FL. Contact them today to learn how they can assist with your automobile insurance needs.

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