What causes your car insurance to go up? Crashing into things. Don't crash into things! Don't crash into people, either.
Flippancy aside, there are many factors that can raise your rates. Certainly, crashes and moving violations will, but there are plenty of reasons for higher rates – many through no fault of your own. In fact, it is not uncommon for car insurance to go up on a yearly basis. Here are several reasons why.
- Inflation – As general costs rise for insurance companies, they will be passed on to you through higher rates. These could be general costs of doing business, such as office and personnel costs, or the costs associated with repairing or replacing your car.
As a broad estimate, inflation has been running around 2% in recent years. Is your increase less than this? It could be worse.
- Actuarial Calculations – To paraphrase Dr. Phil, "It ain't all about you!" There may be factors beyond your control that increase the risk that your policy poses, like changes in the demographic group you belong to or the area in which you live. For example, has auto theft or vandalism increased in your neighborhood recently?
- Unusual Company Costs – Has your provider been hit with many claims recently, or suffered from higher levels of insurance fraud? You may be shouldering some of those costs.
- Loss of Discounts – Check to see if your situation has changed to disqualify you for an existing discount or if a long-forgotten promotional discount has expired.
- Different Car – If you changed cars, the cost to replace or repair your new car may be higher. In addition, if you took out a loan to buy a new car, you may have been forced to add Comprehensive and Collision (C&C) – which is quite an increase if all you had previously was liability coverage.
- Added Drivers – Adding drivers to your policy, especially a teen driver, will cause a significant increase.
- State Mandates – Insurance falls under state regulations. It is always possible that a state-mandated change is causing your rate to rise. Check the website of your state insurance commission for updates that may affect your policy.
- Simple Error – If there is no explanation provided as to why your premiums increased, you shouldn't be afraid to ask. It is possible that a simple error was made. In any case, you deserve to know why your rates increased so you can find out how to counteract the increase, or if changing to a different insurer is likely to save you money.
How can you battle these costs, especially in situations you have no control over? You have two main methods:
- Shop Around – There is no reason you cannot look into options with other insurers and bargain with your current insurance company. Between discounts and different methods of evaluating risk, you may well find a better deal with another insurance company that negates the reason your insurance went up in the first place.
- Alter Your Policy – If cost increases are legitimately higher for you across all insurers, you can raise your deductible to lower your costs, or consider dropping C&C coverage if your car is older. You may have hit the crossover point on the benefits of C&C vs. the costs.
With some diligent shopping and bargaining, you should be able to minimize the rise in your auto insurance policy – and you may even be able to decrease it. A good agent will help you find any savings that he or she can, and you can also comparison-shop online. But it’s still good advice not to hit people!