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Why Did My Car Insurance Company Raise My Rates?

Wondering why your car insurance went up? Here are the most common reasons for auto insurance premium increases.

insurance policy with keys and money

Has something caused you to wonder, Why did my car insurance go up? You’ll learn in this article there are many reasons car insurance goes up. You can control some of these reasons, like:

You can’t control other common reasons for car insurance rate increases, though, such as:

Besides learning why car insurance companies raise your rates, you’ll also learn how to lower your car insurance costs after they go up.

Why did my car insurance go up?

Here are some of the most common reasons car insurance goes up.

Your auto insurance company raised your rates because you got into an accident or you got a ticket

Your car insurance can go up if you’re involved in an accident — whether you caused it or not. You rates can also go up if your insurance company finds out you got a speeding ticket or other traffic citation.

Your car insurance premiums probably won’t increase right away after a ticket or accident. They may go up when it comes time to renew your policy, though.

This is one of the main reasons why some people choose to pay for minor car accidents out of pocket. In many cases, it ends up being cheaper than filing a claim. That’s because claims stay on your insurance record for three years in most states. And you could pay higher rates related to those claims for that entire period.

So, if you recently got into an accident, that could be why your car insurance went up.

The same is true of tickets or citations. Both tickets and citations can make your car insurance go up, especially if you’ve received more than one in the last few years, or if the ticket or citation was for something severe.

For example, driving 40 miles per hour  in a 30 mile-per-hour zone likely won’t raise your car insurance rates as much as driving 100 miles per hour  in a 30 mile-per-hour zone. Similarly, getting a ticket for failing to signal shouldn’t hurt your premium as much as a DUI conviction.

Average auto insurance company rate increases after a single incident
Insurance company Rate increase
Allstate 38%
Progressive 38%
Farmers 32%
Liberty Mutual 23%
GEICO 22%
American Family 18%
Travelers 16%
State Farm 12%
Safeco 12%
Nationwide 10%
Note: Average rate increases are based on non-binding estimates provided by Quadrant Information Services. Your rates may vary.

Your car insurance went up because your credit score went down

It’s also possible that your car insurance rates went up because your credit score went down over the last year.

Many companies look at credit scores when calculating car insurance rates. They can’t do this in California, Hawaii or Massachusetts, which have banned the practice. But they’re free to do so in every other state.

That’s a big deal, as your credit score can do more to raise your car insurance premium than other rate factors, like your driving record. According to Consumer Reports, a poor credit score could add $1,301 a year to your premium payments, on average. Compare this to the $233 that could be added to your average yearly premium if you have a clean driving record and a “good” credit score. Or the $122 per year that could be added to your premium after a single moving violation.

Something to keep in mind: auto insurance companies don’t have to tell you if they use your credit score to determine your premium.

So, if you live somewhere other than California, Hawaii or Massachusetts, you should assume insurers will look at your credit score while coming up with your rates. And you should shop around and get quotes from other companies if your car insurance goes up at renewal time. The increase could be due to your credit score.

Your car insurance premium increased because of changing risk factors where you live

Another reason your car insurance company raised your rates might be that where you live has become riskier in various ways.

Insurance companies look at millions of data points to determine which parts of the country pose the highest risk to their bottom lines. Then they use this risk data to adjust their rates in areas where they take a profit loss on insured drivers.

Some of these risk factors that can change and cause your car insurance to go up for no reason, even if you have a clean record, include:

Uninsured drivers

If the number of uninsured motorists in your area goes up, your car insurance can go up, too. One reason for this is that uninsured drivers cost insurers a lot of money every year. In fact, the Insurance Research Council estimated  that insurance companies paid out $2.6 billion in uninsured motorist claims in 2012. That’s 75% more than they paid out 10 years earlier. Unsurprisingly, insurance companies pass along those costs to customers. 

Distracted drivers

Distracted driving is on the rise as well. Not only is this likely increasing the number of traffic accidents, but it’s likely increasing the average cost of those accidents as well. This is because crashes caused by distracted driving tend to be more serious and severe than your typical fender bender.

Crime rate

Stolen cars and property crimes also cost insurance companies a lot of money every year. As such, if the crime rate where you live increases, your insurer will probably pay out more in claims. And they’ll probably make you help them pay for it in higher premiums.

Weather

People who live in areas that are prone to extreme tornadoes, hurricanes and floods file more claims than people who live elsewhere, as you might imagine. And not only that, but those claims tend to be expensive. Once again, car insurance companies pass those increased costs onto their customers in the form of higher rates.

Your car insurance increased because of rising car repair and medical costs

It’s also possible that your car insurance went up because of rising medical and repair costs.

In fact, both car repair and medical costs have increased at rates faster than inflation in recent years, according to the Insurance Information Institute.

Why? In the case of car repairs, the thing that’s most likely causing costs to spike is all the technology being crammed into today’s vehicles. Yes, that tech makes our cars, trucks and SUVs easier and safer to drive, but it also makes them a lot more expensive to repair. This increases the average cost per claim paid out by insurance providers, and they in turn pass along those increases to customers by raising their rates.

Increasing medical costs are causing the average cost per claim paid out by insurers to go up as well. And these costs aren’t going to stop rising anytime soon, either. The Centers for Medicare & Medicaid Services recently projected that national health spending in the U.S. will grow at an average rate of 5.5% per year between now and 2027.

Couple that with an increase in accidents (due in part to Americans driving more than ever), and it’s easy to see why car insurers regularly raise premiums — yours included.

Your auto insurance went up because of price optimization

How can price optimization make your car insurance go up? And what is price optimization anyway?

Price optimization is a practice insurance companies use to see if you’ll tolerate a premium increase. It looks at purchasing behaviors and patterns to estimate how much a provider can raise your rates without you switching to a competitor. Some people will start shopping around for a new insurer after a $100 premium increase. Others won’t do so until they’re hit with a rate hike of $200 or more.

“I call it the loyalty penalty,” said Washington State insurance commissioner Mike Kreidler. “Because it discriminates against people who don’t shop around for better insurance rates.”

Many states now ban price optimization, but that means most states still allow it. If you live in one of them, price optimization could be the reason your car insurance rates went up recently.

How to lower your car insurance costs after they go up

Here are a few things you can do to lower your car insurance costs after they go up:

1. Shop around

Shop around and compare quotes from several auto insurance companies. This can help you combat price optimization and save you money at the same time.

2. Bundle your coverage

You can net big discounts by bundling multiple insurance policies with the same company. If you get your auto and home coverage from one provider, for example, you could save 20% or more on your overall bill.

3. Ask about other discounts

See if you qualify for any other discounts from your current insurance provider, too. Most insurers offer discounts to good students, safe drivers, seniors, people who drive alternative fuel vehicles and more.

4. Add safety features

Your insurer also may give you a discount if you equip your vehicle with additional safety features. Some of the most common include anti-lock brakes, anti-theft devices, dashboard cameras and electronic stability controls.

5. Decrease your coverage

Especially if you can’t afford full coverage and if you have more coverage than you need, consider stepping it down.

6. Increase your deductible

If you can afford the higher out-of-pocket costs that may come along with it, raising your deductible can reduce your premium.

7. Pay ahead

Insurance companies like it when you make their jobs easier. One way to simplify things is to pay for six months or even a year’s worth of coverage at once. Two more ways are to opt in for autopay and paperless billing. All three can result in lower car insurance rates.

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