Why Does My Car Insurance Keep Going Up? [FAQ]
No matter what you think, insurance companies are in the business of paying claims. We all pay our small share into the pot so that if, by a stroke of bad luck we are in an accident, our insurance will take care of things.
Let’s take a look at how car insurance works, what causes car insurance to go up, and what you can do about it.
Ever Increasing Car Insurance Rates
You’ve been a good driver – you have haven’t had any tickets or accidents in years. Yet your car insurance has gone up for no obvious reason. If this frustrates you, you’re not alone. You’re a safe driver. Shouldn’t your insurance be safe from rate hikes? Not necessarily. This may surprise you but it’s not all about you.
Why does my car insurance keep going up?
How does insurance work?
How are insurance rates determined?
What causes car insurance rates go up?
Are insurance rates regulated?
Causes of Car Insurance Rate Increases
As mentioned earlier, when an insurance company anticipates having to pay out more in claims than it will collect in premiums, it must raise its rates to stay solvent but what causes these costs to go up? When we see rates go up, we usually think back over the last year and come to the conclusion that there is no reason our rates should have gone up. But as we mentioned earlier, it is not all about you.
Why do car insurance companies raise your rates ‘for no reason’?
What is causing the number of car accidents to go up?
- More driving
Economic growth, urban sprawl, and lower gas prices have people driving more than ever. With more cars on the road traffic is more congested and there are more accidents. If there are more accidents then the likelihood that you will be involved in one also goes up. Even if you’ve never been in an accident (yet), your chances of being in one this next year increases and, even if you are not, your insurance company will be paying out more on average and therefore your share of that cost goes up.
- Distracted drivers
The number of accidents attributed to distracted driving in recent years is on the rise and distracted driving-related accidents tend to be more severe. It is too easy to allow ourselves to focus on something other than our driving. Whether the distraction is from in-dash tech, talking and texting on our phones, or eating and drinking while we drive, paying attention to actually driving sometimes takes a back seat. With more distractions there are more accidents and they are more severe. The insurance companies pay for these claims and your share of that cost goes up.
- Uninsured drivers
As the cost of insurance goes up, people decide to take their chances and hope they are not in an accident. But, when you are hit by an uninsured motorist, you expect your insurance company to take care of you and fix your car. Where does the money come from to fix your car? Sure, they might recover some of the money by taking these drivers to court and getting judgments, but, for the most part, the cost of these uninsured motorist claims is spread across all policyholders.
- Acts of God, vandalism, and theft in your area
Weather related events such as flood, wind, and hail damage may cause your insurance company to raise rates in your local area to cover anticipated claims. Increases in car theft rates for your make and model of car in particular or in your area generally can affect your rates. Both new cars and older cars can be affected. When insurance companies notice these patterns in an area, they must adjust their rates accordingly.
What is causing the average cost of an accident to go up?
- Higher repair costs
We are paying more for just about everything nowadays. Vehicle repair costs are no exception. A minor fender bender if either car has to go into the body shop, can cost thousands to repair just a bumper. Part of this is due to higher labor costs but a big part is the advanced technologies built into newer cars.
Advanced safety and driver assistance systems help keep you and your passengers safe but these systems involve complex sensors and computerized components that are expensive to repair. Forward collision sensors in windshields, sophisticated warning devices in the front and rear bumpers, back-up cameras, blind spot detectors, they get more sophisticated and common every year but when these things get damaged, even in a minor fender bender, it costs more to fix the car. Whether it’s your car or the one you hit, these extra expenses increase the average cost of an auto accident.
- Rising medical costs
Medical costs are not going down. Car insurance companies do not get to negotiate with the hospital or doctor like your health insurance and must pay full price for your medical care. These ever-increasing medical costs multiplied by a rising number of accidents are skyrocketing the amount paid out and must be spread out among the whole pool of policyholders.
- Increased insurance fraud
Insurance fraud can be the seemingly innocent inflating of damages after a car accident to profesional fraud rings fabricating and staging accidents. Everyone wants lower premiums and thinks the insurance company is gouging them, so claiming to be married or forgetting to mention a new driver in the household might lower your premium but not risk. When the insurance company does not collect the correct rate from a large pool of people or has to pay inflated claims, they ultimately must increase rates on all of their policyholders to cover the expense.
Why do my rates go up when I have done nothing wrong?
- Change In Your Credit
Your car insurance can go up for what appears to be no apparent reason when, in fact, you have had a change in your credit. Statistically, people who do not pay attention to their bills are also not paying attention to their driving. Using credit may seem unfair to the clean driver but is it any different than your rate going up for getting a speeding ticket for 5mph over?
- Not-At-Fault Accidents
Another factor that is hard to understand and seems unfair is when your rate goes up because someone else hit you. The insurance companies raise the rates on drivers who have not-at-fault accidents for 2 primary reasons: they are more likely to be in an at-fault-accident this next year and they are more likely to be involved in another not-at-fault accident and your not-at-fault accident costs your insurance company money that they must spread over their policyholders.
Why do your rates go up when someone else hits you?
Most companies will say they do not actually charge for the not-at-fault accident. Instead they remove the claim free discount or move you to a more expensive tier within their rating system. Which to you and me means they charge for the accident no matter how they word it.
Every carrier has their own factors used to measure credit and factor accident-free discounts. We understand that bad things can happen to good people and usually when you can least afford it. By using an independent agent like Mid-Columbia Insurance we are able to shop your insurance with multiple companies and can find the one that gives you the best rate, whether your credit is good, bad, or ugly.
How to lower your car insurance rates
Even with all these factors at play, no one wants to pay more than they have to for car insurance – especially when it feels like your car insurance went up for no reason. You don’t have to just accept your new increased auto premium rate. Below are a few things you can do to help lower your premium.
What can I do to lower my car insurance premium NOW?
- Choose a higher deductible.
Choosing to have $1,000 comprehensive and collision deductibles instead of $250 or $500 deductibles will immediately lower premium. It may also keep your rates low because having a higher deductible prevents you from turning in small claims and losing your accident-free discount. You will have to decide if it is more beneficial in the long run to pay for a small claims like replacing a broken windshield or paying more so you can turn it in to your insurance company.
- Enroll in the insurance company’s telematics program
Insurance company telematics programs, like Safeco’s RightTrack™, Progressive’s SnapShot™, and State Farm’s Drive Safe & Save™ are becoming more and more popular. These programs collect information about how you drive, how much you drive, and when you drive. The insurance companies then use this data to personalize your car insurance rate based on your actual driving data. Your safe driving habits could save you up to 30% off your premium.
- Bundle and save
Most insurance companies offer a multi-policy discount when you insure your home and auto with them. Some will even give a discount if you insure your motorcycles, boats, or RVs with them. This discount can be as high as 25%, so it makes sense to have as many of policies as you can with the same company.
What can I do to keep my rates low in the future?
- Drive carefully
Observing traffic rules and speed limits and avoiding moving violations and accidents is the best way to reduce your insurance costs over time. Anymore even a not-at-fault accident may raise your rate because companies have seen drivers who are in 1 accident are more likely to be in another (at-fault or not).
Yes, probably not an option, but just realize where you live affects your insurance price.
- Work with an independent insurance agent
There is no one-size-fits-all solution when it comes to insurance. Unlike a “captive” insurance agent that works with just one company (think State Farm, Farmers, Allstate, Geico, etc), independent agents partner with a wide range of insurance companies. This means we can find the best combination of price and coverage for you. Insurance pricing is based on hundreds of variables and can vary dramatically from company to company.
How much will car insurance cost in the future?
How can Mid-Columbia Insurance help?
Testimonials & Referrals
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