It seems that every year insurance companies raise your rates. It doesn't even matter how good a driver you are. When your premium renews, you're probably going to be paying more. There are many reasons why insurers keep raising rates. Some are less obvious that others. Read on to learn why you will almost certainly pay more for auto insurance this year.
Have you ever been surprised by the high cost of your car insurance? You're not alone, as car insurance rates are steadily rising across the country. If you're looking for answers to why your car insurance is so expensive, we're here to help you.
The price of car insurance depends on many different factors -- some are under your control, while others are not. For example, your car make and model will impact your insurance rates. But national trends like increases in claim frequency and rising medical bills can raise your rates, and there's not much you can do to change that.
We looked at industry reports, survey data, and insurance business trends to identify the main factors behind skyrocketing insurance rates. If you're curious why your insurance costs so much, keep reading to see what applies to you.
One of the main deciding factors behind your insurance rate is your record behind the wheel. Good drivers pay less for insurance because they're less likely to be involved in a claim. But if you receive vehicle citations or get into accidents, you may be designated as a high risk driver. High risk drivers pay substantially higher premiums because they are more likely to cost insurers money through claims.
If you're unsure if you're a high risk driver, contact insurance company and find out. You can also ask your state's DMV for a copy of your driving record. Most citations like speeding or reckless driving will remain on your record for three to five years.
For more details on car insurance for drivers with tickets or accidents, read our article "Car Insurance for Drivers With Tickets or Accidents"
Similar to your driving history, if you file too many claims your insurer will raise your rate. The cost per claim for insurers is rising, and they are passing the bill to their customers. Beyond raising your rates, you run the risk of your insurance company dropping you altogether in the event of too many claims.
If you're concerned about raising insurance rates due to excessive claims, consider paying car expenses out of pocket when possible. For example, it may be tempting to file a claim for a minor fender bender. But the inevitable increase in rates from filing excess claims may cost you more in the long run.
Fact: younger drivers pay more for car insurance. This is especially true for teen drivers. People between the ages of 16 and 19 are three times more likely to be involved in an accident than drivers ages 20 or older. Teen drivers are also involved in fatal accidents at significantly higher rates. Because of this, car insurance companies charge higher rates for teenagers.
Most car insurance companies will charge drivers more until they're around 25 years old. After that, insurance rates level out until a driver is eligible for the early bird special. That's right: senior citizens ages 65 and up pay increased rates due to a few reasons:
Unfortunately, there's not much you can do about your age. Make sure you shop around to get the best deal. For more information on how to get the best deal despite your age, visit our page "Car Insurance For Teen and Senior Drivers"
It's easy to forget about car insurance discounts. After all, there are tons of different discounts available, and it's usually up to the customer to inquire about them. You may qualify for discounts for several reasons, such as these:
It's up to you to find out which discounts you're eligible for. For a comprehensive guide, read "32 New Ways to Earn Car Insurance Discounts"
Each state has set minimums for each type of coverage. If you purchase more than the state minimum level of coverage, you can expect to pay higher rates. Every state except New Hampshire requires some form of these three types of coverage:
Many drivers buy only the state minimum levels of coverage. But if you purchase more, or add extra perks to your plan like roadside assistance or comprehensive and collision coverage, your rates will rise.
To find out more information about your state's minimum coverage requirements, read "Bare Minimum Coverage Levels by State"
Expensive cars cost more to repair, which means they cost more to insure. Repairing a classic car or a brand new sports car is more expensive than repairing a reliable albeit boring vehicle.
Car insurance companies also consider a vehicle's safety record as well as the likelihood of theft. If your car ranks poorly on safety tests or has known malfunctions, expect to pay more. And if your car is among the models that are frequently stolen, your insurer may charge higher rates.
For more on how your car make and model impacts your premium, read ""
Some studies show that poor credit scores coincide with higher claim frequency and payouts. As a result, people with bad credit pay more for car insurance. It's a contentious practice that has earned criticism, but it's a reality. If you have shoddy credit history, be prepared for higher rates.
For more information on how your credit score can hurt your rates, see "Credit Scores and Car Insurance Rates"
A deductible is the amount you must pay before your insurance kicks in. For example, let's say you have a $500 deductible. If you get into an accident and cause $1,000 worth of damage, you have to pay $500 out of pocket. Your insurer covers the rest.
It's tempting to purchase a low deductible so you can rely on your insurance company to cover your costs. But a low deductible is expensive. If your insurance premium is too high, consider purchasing a higher deductible. It will lower your monthly bill – but be aware that your out-of-pocket costs will be higher in the event of an accident.
A high deductible is a bit of a gamble. If you're unsure about your deductible, read our article, "What Should My Deductible Be"
The state and city that you call home is vital to deciding your car insurance rate. Insurers consider several geographical factors when pricing your plan:
It's a practice that has courted some controversy, as it disproportionately affects poor and minority neighborhoods. But the current reality is that people in poorer neighborhoods can generally expect high insurance premiums.
For more information on how your geographical location can impact your car insurance rate, please read our article "Where You Live Affects Car Insurance Rates"
The good news is that you're not alone when it comes to rising premiums. Reports indicate that car insurance companies are seeing diminishing financial returns due to a variety of factors:
Each insurance company's method for determining rates is different from other companies. That's why it's crucial to shop around for auto insurance and compare quotes. If you don't do your due diligence, you may end up paying inflated rates. Your insurance company may overvalue a factor that you rank poorly in, while another company is more forgiving.
Read "How to Compare Car Insurance Rates" for more information.
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