What Do Car Insurance Companies Look At?
The main factors auto insurance companies look at when determining your rates include:
- Your Driving Record: Stay safe on the road. Accidents, speeding tickets, and other traffic violations can have a massive impact on your premiums. The cleaner your driving record looks, the less you will have to pay for car insurance.
- Vehicle History: Does your car have a lot of issues? Do you need to get it fixed often? Has it been in multiple accidents? These will all go on your vehicle history report. You might consider switching to a newer, safer automobile if you are sick of paying high insurance premiums.
- Financial Responsibility: Your insurance score, as well as your credit score, plays a role in determining your rates. If you are financially irresponsible, insurers will view you as a higher risk, and you might be forced into purchasing coverage for high-risk drivers.
- The Value of Your Vehicle: Higher-value vehicles are more expensive to insure than lower-value vehicles. Generally speaking, you’re going to pay more to insure a Maserati than a Ford Focus. In the event of a collision, it costs more to repair a Maserati than a Ford Focus, and your insurance company has to cover the entire value of the vehicle.
- Gaps in Insurance Coverage: If you have gaps in insurance coverage – like a year or more of no auto insurance history – then your insurance company may consider you a risky driver. This is why it’s always essential to maintain continuous coverage.
- Where You Live: If you live in a neighborhood with high rates of accidents, thefts, or break-ins, your insurance company might charge you higher premiums. Highly-populated areas, like dense cities, are known to have higher insurance rates than rural areas.
- Annual Mileage: The average adult drives approximately 15,000 miles per year. Your insurance company uses mileage to determine the cost of your insurance premiums. Consider driving less if you want to see your insurance rates drop.
In other words, your insurance company will see every time you get into an accident, get a speeding ticket, forget to pay a bill, or make an insurance claim. Make sure you keep these things in mind if you experience “sticker shock” after seeing your insurance bill.
What Are the Most Common Reasons Auto Insurance Companies Increase Your Rates?
Remember that insurance companies exist to earn money. As businesses, they are always looking to raise premiums so that they can remain profitable. If you want to keep your premiums low, you should try and not give them any excuse to charge you more. That being said, here are some of the most common reasons why a car insurance company might increase your rates:
- You Had an At-Fault Claim: The most common reason for rate increases is that you filed an at-fault claim. This means that you were involved in a collision where you were at-fault and you made a claim against your policy. Unless you have accident forgiveness with your auto insurance coverage, there is a 99% chance that your rates will increase following an at-fault claim.
- You Lost Your Good Driving Bonus: Your car insurance company might reward you for every year of clean driving. You might get a 5% bonus, for example, for every year without a claim, a speeding ticket, or a collision. If you get involved in an accident or are cited for a moving violation, then you might lose this bonus. Losing your “good driver discount” is one of the most common reasons insurance rates increase without an at-fault collision.
- You Changed Your Address: Certain neighborhoods are more dangerous than others. Living in a neighborhood with a high crime rate could cause your comprehensive coverage (which covers vandalism and theft) to increase.
- You Bought a New Vehicle: Different vehicles cost different amounts to insure. Make sure you are familiar with which cars are cheap to insure and which cars are expensive to insure.
- You Lost Your Bundling Discount: If you recently canceled your homeowner’s insurance policy, then your car insurance rates might go up. That’s because many insurance companies offer discounts for bundling policies together. Consider buying all insurance products your family needs from the same insurance company to get the most savings.
- You’re Driving More: Maybe you changed your job. Maybe you have a new commute. Perhaps you became employed after being unemployed. Regardless, the more driving you do, the more likely you will be involved in a collision. Because of the higher risk associated with people who drive higher-than-average miles, insurance companies charge this group higher insurance rates.
- You Moved to a New State: Moving to a new state can lead to significant changes in car insurance prices. Different states have different rules and insurance requirements. See which states have the cheapest car insurance rates here.
- You’re Considered a High-Risk Driver: Maybe you got a DUI. Maybe you developed a medical condition that increases your risk. Maybe you’re a young male driver. If you’re considered a high-risk driver, then you’re going to pay more for car insurance.
- Your Insurance Company Made an Honest Mistake: Sometimes insurance companies make mistakes. Your rates might go up because of an honest mistake. If you have no idea why your insurance premiums increased, then contact your insurance company to ask about the rate change.
- Your Car Insurance Company’s Costs Increased: Sometimes, car insurance companies pay out an unexpectedly high number of claims in a year. Multiple hailstorms may have hit the area, for example, forcing your insurance company to pay out millions of dollars in damages. To cover these unexpected costs, the insurance company might raise rates across its entire pool of drivers.
- You Got Older: When you’re younger – say in your teens or early 20s – car insurance prices decrease with age. Once you hit a certain age, however, car insurance prices will start increasing with age. After around 70, for example, you might notice car insurance prices increase as you get older.
Other things that can cause your insurance rate to increase include, but are not limited to: adding more drivers to your policy, adding more cars to your policy, state-enforced insurance rate hikes, and decreased nationwide insurance demand.
How Do Insurance Companies Increase Your Rates?
If the auto insurance company decides to increase your rate at any time, they cannot just automatically charge you more on your next bill. Rate increases go into effect when your policy is renewed or when your current policy ends. The insurance company also cannot cancel your policy mid-term based upon new information they discover. Your insurance premium is pretty much “set in stone” throughout the length of the policy.
If you do not want to see a huge price increase on your next insurance policy, make sure you consider the things listed above. Keep in mind that if your rates get too high, you can always take your business elsewhere. Speak with different insurance companies to get different insurance quotes.