What raises car insurance rates? When you go to renew your policy and find that your quote is much higher this time around compared to last time, you’re probably wondering what gives.
In general, it’s important to understand how and why car insurance companies determine the amount of money they’ll charge you for your car insurance. The business of insurance is all about assessing risk. In order to turn a profit, insurance companies must collect more in insurance premiums than they pay out in insurance claims. To make sure they strike that balance, they must cover their losses by charging higher-risk drivers more for coverage.
What raises insurance rates is an increase in ‘perceived risk,’ or how likely your insurer thinks you are to submit a claim. While they can’t sit in the vehicle with you and see how good of a driver you are, they can use other factors and facts about you to make their best guess about how much of a risk you are when it comes to filing a claim that must be paid out.
With that in mind, you’ll notice that most of the factors on our list of what raises car insurance rates are directly related to that perceived risk. Others, however, are related to other factors.
We want you to be as informed as possible about what goes into the monthly premium you’re charged by your insurance company, so here’s our list of the most common things that cause car insurance rates to increase.
At-Fault Accidents
One of the most common reasons for a car insurance rate increase is an accident where you’re at fault. If someone files a claim to your insurance about an accident you caused, you can expect a boost in your monthly premiums.
That said, there are some exceptions. Some insurers will allow for small claims of $500 or less without raising your rates, while others offer what’s known as ‘accident forgiveness,’ where they won’t increase your rates after just one at-fault claim on your policy. Ask your insurer what their policies are when it comes to at-fault accidents and what raises car insurance rates for you.
Traffic Violations
Traffic violations cover any incidents where you are found guilty of failing to obey traffic-related laws. These can range from minor infractions, such as slight speeding or failure to obey a traffic sign, to major violations, such as DUIs or driving under a suspended license.
Generally, the more serious the violation, the more dramatic the increase in your insurance costs. Some extremely minor violations may not result in a rise in your premiums at all.
Change in Location
Where you live can have a bigger impact on your insurance premiums than you think. One of the main reasons for that is simply that some cities and areas have higher rates of traffic accidents, auto thefts, or weather-related damage. If you move from a relatively safe area to one where vehicle incidents are more common, you can expect to notice a bump in your insurance costs.
Another reason for this change from one location to the next may be as simple as market standards. Moving from Iowa to California, for example, will result in a significant bump in car insurance premiums for the simple reason that just about everything is more expensive in California. From the insurer’s perspective, if the competition is charging more, you can, too.
Submitting a Comprehensive Insurance Claim
In most cases, a comprehensive insurance claim won’t affect your premium. But we included this item on our list of what raises insurance costs because more and more companies are beginning to charge more for policyholders who have submitted comprehensive claims.
Some companies charge more for insurance premiums if they’ve paid you more than $500 for comprehensive claims, or if you have multiple claims. As with many of the items on our list, it’s all about how insurers assess the risk of you as a driver and vehicle owner. Even if a tree falling on your car isn’t your fault, it might make your costs increase.
Lower Credit Score
Believe it or not, your credit score can have an impact on your insurance premiums in some states. Some insurance companies have conducted research that suggests a link between lower credit scores and lower driving risk, the idea being that if you’re likely to make more responsible financial decisions, you’re likely to be more responsible behind the wheel, too. While you may or may not agree with this logic, the fact is that a decrease in your credit score can sometimes lead to an increase in your car insurance costs.
Age
Age plays a big role in your car insurance premiums, but generally only if you’re very young or very old. Teenagers are famously much more expensive to insure than adults, and senior citizens can also experience higher premiums as they’re a statistically likely group to be involved in traffic accidents. If you’re a teenager that’s reaching college age, the good news is that you might soon experience a drop in insurance premiums. But if you’re aging into your golden years, your premium may rise slightly as you get older.
New Vehicle
One of the ways that insurers assess their own financial risk is by looking at the type of vehicle you drive. Certain vehicles are more costly to repair, such as large or expensive vehicles that feature top-of-the-line or proprietary technology. Others are considered more likely to be involved in an accident, such as sports cars which tend to be owned by people who like to drive fast (and may occasionally forget about the speed limit).
If you’re looking into purchasing a new vehicle, you should consider whether it will significantly raise your insurance premiums. You’ll want to factor this increased monthly cost into your budget when determining how much vehicle you can afford to buy.
Increase in Mileage
Vehicles that drive more are more likely to be involved in accidents— that’s a simple statistical fact. So if you report more miles on your next request for an insurance quote than your last one, don’t be surprised if it results in an increase in your premium. Ask your insurer what their mileage thresholds are for premium increases or decreases. The amount of change may not be significant, but you may be able to save in some cases by driving less or taking public transit occasionally to reduce your costs.
Additional Coverage
What raises car insurance rates the most? Purchasing more car insurance! While many of those additional coverage options such as roadside assistance or rental car coverage when your vehicle’s in the shop may seem appealing, they can also jack up your insurance costs. The same goes for boosting your maximum coverage limits. While these can all help offer additional financial protection, they may not be worth it if it comes at the cost of your ability to pay your monthly insurance premiums.
Lower Deductible
It’s a fact of car insurance— the lower the deductible, the higher the monthly premium.
A deductible is the set amount that the policyholder must pay for a covered incident before their insurance will step in and cover the rest. For example, if you have a $500 deductible and are involved in a covered incident, you’ll have to pay $500 out of pocket and your insurance will cover the rest.
Deductibles can range from between $250 to $1,000. The lowers yours is, the higher your monthly premiums will likely be.
Lapses in Coverage
If you go a period without insurance, it’s known as a lapse in coverage. Lapses in coverage can usually lead to increases in your premium once you do get coverage again.
That said, there are some exceptions. Many companies will let you reinstate your insurance within a week without penalties, and some offer as much as a month-long grace period without major consequences. That said, this usually only applies if you are reinstating an existing policy, not setting up a new one.
Driving Experience
The longer you’ve been driving, the more experience you have on the roads, and the less risky you’re considered by insurance companies. If you’ve been driving for a long time with a minimal amount of traffic incidents or claims, your insurance costs should start to inch down the more time passes.
Marital Status
Statistics show that married people are safer drivers and drive less than single people. What does that mean for insurance costs? You guessed it— if you’re married, you’ll probably pay a little less for insurance than a single person. The difference isn’t huge— usually between 5% and 15%— but it is significant.
Changes to Legislation
Sometimes a rise in insurance rates is as simple as a change to the laws of your area. Insurance companies are always trying to work alongside the regulations in areas where they insure drivers, so a change to the laws could result in a change to your premiums.
Conclusion
As you can see, there is a wide range of factors that can raise your insurance rates. Fortunately, Freedom National offers access to the best rates available for your unique situation— and we know the best ways to lower your car insurance rates. Get a quote today and start driving with Freedom national.
