Why Do Insurance Rates Go Up?

Doesn’t it suck when you try to renew your auto insurance policy only to find that your rates have increased? Though it may seem like your auto insurance rates always seem to go up and that there is nothing you can do about it; they don’t increase for no reason. We actually have a lot of control over our premiums.

What Do Car Insurance Companies Look At?

Insurance Rate Increase

The main reports auto insurance companies look at when determining how much they will charge you for auto insurance include:

  • Your driving record – Stay safe on the road. Accidents, speeding tickets, and other traffic violations can have a huge impact on your premiums. The cleaner your driving record looks, the less you will have to pay for insurance.
  • Vehicle history – Does your car have a lot of issues? Do you need to get it fixed often? Has it been in a lot of accidents? These all affect your vehicle history report. You might consider switching to a newer, safer automobile if your vehicle has a poor history report.
  • Financial responsibility – This includes your credit score as well as your financial standing with your insurance company.
  • 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.
  • Where You Live: If you live in a neighborhood with high rates of accidents, thefts, or break-ins, then your insurance company might charge higher rates. Highly-populated areas – like cities – also 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.

In other words, your insurance company will see every time you get into an accident, get a speeding ticket, forget to pay a bill, make an insurance claim, etc. Make sure you keep these things in mind!

(Note – If you are curious as to how much your insurance will increase following a car accident, please take a look at this article on after accident auto insurance and accident forgiveness)

What Are the Most Common Reasons Auto Insurance Companies Increase Your Rates?

Insurance companies will take any excuse to raise your rates. Here are some of the most common reasons why a car insurance company might increase your rates:

You Had an At-Fault Claim: This is the most common reason car insurance rates will increase. You had an at-fault claim. You were involved in a collision where you were at-fault. In this situation, the car insurance company might raise your rates.

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 any incident – like if you get a moving violation – then you might lose this bonus. Your car insurance rates increase even though you weren’t involved in an at-fault collision.

You Changed Your Address: Certain neighborhoods are more dangerous than others, which could cause your comprehensive coverage (which covers vandalism and theft) to increase.

You Bought a New Vehicle: Different vehicles cost different amounts to insure.

You Lost your Bundling Discount: If you recently canceled your home insurance policy, then your car insurance rates might go up. That’s because insurance companies bundle policies together, giving you a discount on both.

You’re Driving More: Maybe you changed your job. Maybe you have a new commute. Maybe you became employed after being unemployed. The more driving you do, the more likely you will be involved in a collision, and insurance rates go up.

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.

You’re Considered a High Risk Driver: Maybe you got a DUI. Maybe you have 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 insurance increased, then contact your insurance company to verify 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.

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 in the reports discussed above. Your insurance policy is pretty much insured throughout the length of the policy-term.

Other things that can cause your insurance rate to increase include – adding more drivers to your policy, adding more cars to your policy, buying an expensive luxury car, state-enforced insurance rate hikes, and even nationwide insurance supply and demand. Click the infographic below to view a more detailed list about what determines your car insurance rate:

Car Insurance Rates

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.


  Comments: 2

  1. Michelle Eric

    Why does insurance rates don’t get a fixed amount, I mean, it’s hard to tell if with low cost insurance I will also have the benefit just the same as high cost insurance provides. All of the people that I know of seems to have the same point of view.

    • Andrew@4AutoInsuranceQuote

      Hi Michelle,
      It’s not really clear what your question is, but you’re right in that rates don’t go up a fixed amount. This is because they can’t, or wouldn’t have a reason to. In theory, auto insurance rates wouldn’t go up a set amount each year, and some years they don’t. The main reason they do go up is the auto insurance company reported low profits or even a loss from last year’s total policies. This is mainly due to a large number of accidents, meaning they pay out a lot of claims. Also, vehicles are more expensive to fix. These things vary from year to year, so it would be difficult for rates to go up a set amount each year.

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