Why Did My Car Insurance Go Up? Let’s Take A Look…
A sudden increase in your car insurance rates can be very frustrating, especially if you haven’t submitted a claim with your insurance company or you have a clean driving history.
Auto insurers base the cost of their policies on a few factors.
Some of these factors are within your control and can curb higher car insurance rates. Others lead to escalating insurance costs that are completely beyond anything you can do.
In this article, we’ll provide you with insight into what you can do to reduce your car insurance premiums which may have gone up recently.
We will also look at other factors and trends that affect car insurance costs so that you can plan your monthly budget a bit better.
What Makes Auto Insurance Rates So Expensive?
Insurance premiums seem to be increasing all the time, making it difficult for many people to maintain their auto insurance policies.
But why are these costs escalating so much?
Trends in car crashes
The number of crashes that typically occur in your state can lead to higher insurance costs.
Insurers will look at the cost of these crashes when it comes to repairs and the replacement of vehicles.
The likelihood of crashes where you live is also a factor when it comes to increased car insurance rates.
For example, in large metropolitan areas where there is more traffic and a greater risk of a crash happening, you are likely to pay more for your car insurance.
In addition to crowded roadways, speed limits are being raised. Speed is known to be the single-biggest contributor to crashes.
Distracted drivers are an issue everywhere. In cities large and small, people can be found texting or talking while driving which is leading to an increase in car crashes nationwide.
Auto insurance is about more than just vehicle repair costs—it also covers medical costs related to the injured crash victims’ care.
In addition, car insurance covers lost wages for crash victims, repairs and replacement of motor vehicles, and any property damaged in a crash.
The cost of medical care, auto body repair, and legal support has increased at a rate much faster than inflation, which means that insurers have had to increase their rates to keep up.
Falling unemployment rates
Another trend that has been impacting the cost of auto insurance is the increase in employment nationwide.
While it is good news that unemployment is falling, there are now more people driving to and from work.
This increases how many cars there are on the road. It also means that there are people with more disposable income who will be driving around for leisure in addition to driving to and from work.
The increase in the usage of cars means that there is a greater risk for insurers. The greater the risk insurers face, the more they will charge to insure their customers.
Possibly the biggest driver of increasing car insurance rates is the constant rise in inflation. Between June 2021 and June 2022, the Consumer Price Index (CPI) rose by 9.1 percent.
This means that we are all spending 9.1% more on goods and services than we were a year ago.
Because of this increase, the cost to repair or replace vehicles has increased as well.
Car insurance is designed to pay for the costs after an accident, which includes property damage and medical costs.
This means that anything that increases these costs is likely to increase car insurance rates.
Insurers need to make sure that they have enough funds to pay claims, so when inflation rises car insurance premiums go up, too.
Supply chain disruptions
Along with the COVID-19 pandemic and the national lockdowns that followed, the production of vehicle parts came to a halt.
When normal levels of driving resumed in 2021, manufacturers initially just could not keep up with demand, which meant that parts and labor became more expensive.
With these rises in costs came an increase in insurance premiums which we are still experiencing today.
Supply chain issues have made car parts harder to find, while labor shortages have made skilled labor harder to source as well.
Dubbed ‘The Great Resignation’, workers in various industries and fields have resigned to find alternative employment.
Fewer workers can contribute to higher insurance costs. When there are fewer people to do a given job, including vehicle repair and auto manufacture, pay rates often increase as a result.
Increased pay rates result in increased fees and prices, which in turn means that insurers must pay more for vehicle repairs and replacements.
Auto Insurance Rates: How to Keep Premiums Low
There are a few steps that you can take to keep your car insurance premiums low. Auto insurance companies will reward you with cheaper insurance rates if you:
Avoid speeding tickets and other traffic violations
Violations on your driving record—and in particular a DUI—as well as multiple speeding tickets or tickets related to distracted driving, indicate to your insurance company that you are more likely to be involved in car accidents.
The more violations that you have, the higher your risk of filing a claim. This can result in higher car insurance rates.
Even a small traffic or moving violation can increase your insurance rate.
When it comes to at-fault auto accidents, these can increase your car insurance costs significantly.
This is because many insurance companies will penalize you if you have been the cause of a car accident.
You may also wonder whether your car insurance will go up if you did not cause an accident, but were involved in one.
This all depends on your driving record. If you have a clean driving record, your insurance rates may not actually increase.
However, if you have been convicted of numerous traffic violations, then this may still increase your auto insurance rates.
It’s good to know that parking tickets will not increase your car insurance costs.
Reduce your auto insurance claims
If you are trying to lower your car insurance rate, try to avoid making comprehensive or collision claims for smaller damages.
Key Point: What Is Comprehensive Coverage and Collision Coverage?
Comprehensive cover: This insurance pays for damage caused to your vehicle by events such as theft, vandalism, or hail, which are not collision related.
Collision cover: This covers damage to your vehicle in the event of a covered accident involving a collision with another vehicle. This can include repairs or the full replacement of your vehicle.
Weigh up the cost of the claim versus the impact on your auto insurance rates.
You can call your insurer to find out what car insurance rate increase you might expect if you were to file a car insurance claim.
A good insurance company will advise whether the cost of the rate increase is worth the claim.
Limit adding vehicles and drivers to your auto insurance policies
If you purchase a new car, or a more expensive vehicle than you’ve had before, you could be considered a greater insurance risk by some insurance companies.
This is because more expensive cars often come with safety features which—despite being useful when maneuvering the car—can be more expensive to repair in the event of an accident.
On the other hand, chances are that a new car is more likely to get stolen and also cost more to repair or replace than your previous vehicle.
Most insurers will also raise rates when you add more cars to your auto insurance policy.
Teenage drivers and family members with a poor driving history will increase your car insurance rates as due to their inexperience as drivers, they are seen as more of a risk to insure.
Maintain a high credit score
A few states prohibit auto insurance companies from using your credit score to determine insurance rates. These states include:
However, in all the other 45 states, insurance companies do have access to data that shows a link between your credit score and your chances of filing a claim.
Each state has its own set of regulations when it comes to calculating how your credit score will impact your risk for sending through a claim.
A credit score, when it comes to insurance, is also known as your credit-based insurance score.
Whereas a credit score assesses your ability to repay debt, a credit-based insurance score uses your credit history to predict the likelihood of you filing a claim.
A low credit score will impact your credit-based insurance score and can push up car insurance rates.
This is because you will be seen as a higher insurance risk to insure or be more likely to file a claim.
Add your spouse to your auto policy
Your marital status is one additional consideration for insurers when they assess your insurance rates.
If you are married, many insurance companies will require you to add your spouse to your car insurance policy if you’re both living in the same household.
If you and your spouse have good driving records, a joint car insurance policy can save you money with lower premiums and a multi-car discount.
Avoid lapses in your car insurance
When it comes to policy renewal time, be sure to continue with your insurance coverage, whether you stick with the same insurance company or switch to a new one.
You can also maintain lower rates by keeping your auto insurance policy up-to-date.
Car insurance companies typically offer a grace period for missed car insurance payments, so a payment that’s a few days late shouldn’t cause a problem.
If you want to reinstate your policy after a longer period of being uninsured, you will pay more for insurance.
Don’t Lower Your Car Insurance Coverage to Save Money
With the rising cost of car insurance, you may be tempted to lower your coverage from full coverage car insurance to minimum coverage car insurance, but insurers advise against this.
Car insurance coverage is designed to protect your finances after an accident has occurred, and lowering your coverage could leave you with higher out-of-pocket bills.
Key Point: What Is the Difference between Full Coverage and Minimum Coverage Car Insurance?
Full coverage insurance includes collision, comprehensive, bodily injury, and property damage liability.
Minimum coverage, on the other hand, includes just bodily injury and property damage liability.
Bodily injury liability pays for someone else’s medical bills if you’re liable for their injuries in an auto accident.
Property damage liability pays for damage to someone else’s vehicle and property if you are liable in a car accident.
There are a few ways that you can lower your auto insurance costs. Here are a few tips:
Review your current policy
Make sure that you understand everything in your current insurance policy. Learn about the coverage types, limits, and discounts.
Understanding your policy will help you if you want to query any portion of the policy and negotiate a discount.
Shop for a new carrier
Comparison shopping is essential to obtain the best cost for the type of coverage that you need.
Use a website like ours to quickly see what insurance rates you could be paying with other insurers. Simply head to the top of this page, enter your zip code, and find quotes immediately.
Take advantage of discounts
Knowing exactly what your policy covers and which discounts are already applicable to you is essential to knowing how many more discounts you can ask for.
Also, knowing what discounts you should be eligible for is beneficial when shopping around for reduced insurance rates.
You may get discounts for:
- Installing anti-theft devices.
- Bundling auto insurance and homeowners insurance.
- Defensive driving courses.
- Long-time customer discounts.
- Insuring more than one car.
- Not having an accident for 3 years.
- Not having any moving violations for 3 years.
- Student drivers with good grades.
Bundle your policies
Be sure to check whether you can bundle your homeowners insurance and vehicle insurance policies.
This is because bundling your major insurance policies with one insurance carrier will get you a better rate.
Reviewing your insurance portfolio regularly is essential, because it will help you understand where you can get discounts for bundled policies.
Beat Insurance Price Hikes Today with CheapInsurance.com
With insurance prices increasing all the time, it’s important to make sure that you know how much you should be spending on car insurance.
We recommend that you use our free quote generator to get an immediate idea of how much you could be spending on your car insurance.
Simply head to the top of this page and enter your zip code. You will immediately get a wide selection of insurance quotes to choose from.
Once you have an idea of the auto insurance premiums that you could be paying, it will be time for you to contact the insurers that are offering you the cheapest rates to get a formal quote.
When you’re ready to ask for a formal quote, it’s important to speak to your insurer and list the opportunities for discounts that you believe are relevant to you.
Getting car insurance should be quick, simple, and stress-free, and you deserve to get the best insurance rates possible.
At CheapInsurance.com, we’ve got you covered!