Why Did My Auto Insurance Premium Rise?

Paying insurance premiums is something we wish we could forgo and still get financial assistance when our rides experience damages. But the wish can never be practical since car repairs are not cheap for anyone to offer for free.

Since we cannot ignore this recurring expense, we often become attracted to companies with the cheapest auto insurance policies. And after analyzing them, we commit to them when we are satisfied. Sometimes, even after getting the best deals, you can start seeing a change in your insurance premiums. The rate starts going up. Let us look at some of the reasons that can lead to a rise in your insurance rates:

1.      Having a Poor Credit Score

When investing in auto insurance, ensure you maintain a high credit score to enjoy favorable rates. Insurance companies associate clients with low credit scores with high levels of stress. As a result, they are likely to cause damage to their cars through accidents. 

If you had some nice rates at the beginning and suddenly started experiencing some weight paying, check your credit score. Some states such as California, Massachusetts, Maryland, Hawaii, Michigan, Oregon, Washington, and Utah prohibit using credit scores by auto insurance providers to determine their premiums. 

Unless you are from these states, your premiums will keep increasing if you do not keep your credit scores high.

2.      Getting a Traffic Record

Insurance providers make good profits when there are few claims to pay. And if your chances of filing a claim increase, they consider you a high-risk customer. Consequently, they will increase your premium rate if they discover a traffic violation has been added to your driving license.

If you have been driving carelessly lately or under the influence, you will feel the pinch while paying for your next cycle.

3.      Relocating to a Densely Populated Area

You can move to a new area for reasons such as work, starting a new life, business opportunities, education, and others. While moving may seem like a normal thing, insurance companies do not take relocations lightly. Of course, if you move to a less populated area with good weather, the insurers are happy and can give you premiums at reduced rates.

The problem comes when you relocate to a densely populated area or one with poor weather and consistent natural calamities. In such locations, the insurer feels that the risks of burglary, theft, and damage from the weather are high. To avoid huge losses, they increase your premiums to a rate that favors their operations.

4.      Age

Insurance companies categorize teens and senior citizens as high-risk drivers. If you have been enjoying favorable rates and had your birthday recently, perhaps you should consider your age.

If you marked the age of 60 with your recent celebration, your provider has a surprise for you—increased premiums!

5.      Inflation

The effects of inflation run across industries, usually on small margins. Prices of items change over the years. For example, if you purchased a car in the year 2016/2017 for $14,000, the same vehicle would retail at $16,000 in the year 2019/2020. Insurers have to adjust to reflect changes in such prices.

In 2022, the inflation rate is particularly drastic, with the consumer price index (CPI) rising to 8.6%. As we have seen, the market price for cars affects the insurance rate. Between 2012 and 2022, the prices of new and used vehicles increased by 12.6%.

So, if you are reviewing your rates in 2022, you should understand that inflation has a significant effect on your premiums.

6.      Loss of Discounts

Auto insurance companies offer discounts on various occasions, such as when you are a new customer if you belong to a specific category of profession, and more. These discounts are not offered for a lifetime. Instead, they run for about three years, after which they are no longer applicable.

If, for example, you have been enjoying a 10% discount for scoring good grades and the discounted period is over, you will start noticing a change in your premiums. The rates go back to normal, and you start paying more than the usual.

7.      Adding Drivers or Vehicles in Your Policy

When your teen or spouse finally gets their driver’s license, it is natural to want to include them in your insurance plan. Insurance companies are quick to notice such changes. In as much as they want to provide you with premium services, they also want to take some profit home.

Adding drivers to your policy means higher risks.

Additionally, if you add another car to your policy, the rates will go up. They get even higher when it is a luxury sports car. Their parts are expensive to repair, and these vehicles are susceptible to burglary. Another reason luxury sports cars can dramatically increase your rates is because the new owners of these rides are statistically reckless drivers.

8.      Marital Status

Insurance companies get more claims from single drivers than those in marriages. Married drivers tend to drive more carefully since they have someone to go home to. If they have kids, they are cautious since they are responsible for keeping them safe. If you change your marital status from married to divorced, you will notice a rise in your premiums.

9.      Rate Level Changes

Every business assesses its performance at specific intervals, usually annually, to determine if it is making profits or losses. If an insurance company is continually recording losses, it may not be sustainable for long and may eventually close down.

If the losses are high and the company can no longer serve its clients properly, a rate level increase is applied. This increase usually occurs across the industry, mainly because of the medical and repair costs that are continually increasing. 

Insurance companies have little to no control over these changes, and you can feel them when paying your premiums. 

Do you ever wonder what happens to your rates even after maintaining a clean driving record and renewing your policy on time? Sometimes, your actions can be a leading cause of the increase. Other reasons are external factors that you cannot control and are felt across industries. 

Huynh Nguyen

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