You’re starting your morning with a fresh cup of coffee as you catch up on emails for the week. The first one you see is from your insurance company, notifying you that it’s time to renew your auto policy. You do a double-take. The new monthly cost is over $20 more than it was over the past year!
How can that be? You haven’t had any accidents or filed any claims. And your car’s a year older. Doesn’t that mean your new premium should be LOWER, not higher?
Let’s look at several factors that can contribute to an increase in your auto insurance premium. You may be able to lower the cost before you renew. Or it may be time to find a new insurance company that offers a more affordable policy.
Understanding Your Car Insurance Cost Per Month
Your insurance carrier calculates your premium by looking at various factors, including your credit score and driving behavior. Here are several factors that may impact your auto insurance premium and how much you’re required to pay for coverage every month:
- Age (yours and the vehicle’s)
- Vehicle usage
- Selection of coverage
- Payment method
- Insurance history
- Driving record
- Insurance score
Once your premium is determined, you can decide whether you want to pay it monthly, every six months, or yearly.
Factors That Cause Your Auto Insurance Premium to Rise
Don’t forget to contact your insurance company to update your address when you move. Your new zip code might cause your insurance rates to change, even if your coverages stay the same. It’s common for insurance costs to go up if you move closer to a highly populated area with more traffic.
If you move to a different state, you may have to cancel your previous policy and take out a new one. Average auto insurance premium costs can vary significantly from state to state.
2. Drop in Credit Score
Your credit score can play a significant role in the cost of your insurance premiums. If your score drops, you could see a hike in your insurance rates. Ask your insurance agent if this is what caused your premium to increase.
3. Loss of Discounts
If you’ve had an accident or received a traffic violation, you may lose one or more of your discounts. Check with your agent to see which—if any—discounts you lost and why. Also ask if there are any new discounts available to help lower your rates.
4. Increase of Claims in Your Area
If there’s a sudden increase in the number of claims made in your area, your insurance company could raise its rates to make up for it. This is common in regions that experience severe weather, such as tornados, blizzards, hurricanes, hail, or flash flooding.
Your rates could also increase if the number of accidents in your area rises year over year. Distracted driving has become an increasingly prominent problem due to smartphone use and more complex auto technology.
5. Traffic Violations
There are two types of traffic violations—major and minor. Both can cause your rates to increase, but major violations can have much more severe consequences.
If you receive a traffic violation, you can choose to appear in court and fight your ticket. If you win, your rates should remain steady and your driving record shouldn’t be affected. You may also be able to attend traffic school to avoid a premium hike.
Common Traffic Violations
- Texting and driving
- Distracted driving
- Careless driving
- Reckless driving
- Running a red light
- Driving too slowly
- Talking on your cell phone
- Failing to yield to pedestrians
- Following another vehicle too closely
- Driving under the influence
- Passing or turning improperly
- Not wearing your seatbelt
- Driving without insurance
- Driving without a license
- Driving with an open container
6. Comprehensive Claims
You’d file a comprehensive claim for an incident that was outside of your control. Common events include hitting an animal, a rock hitting and cracking your windshield, theft, vandalism, or weather-related damage. A comprehensive claim shouldn’t impact your premium as much as a collision claim, but it could still cause your rates to increase.
You’re likely to see a more substantial increase in your insurance rates if you’re involved in an accident that is your fault. Ask your insurance carrier if they offer accident forgiveness for your first accident claim to avoid a price hike.
8. Lapse in Insurance
If you’re currently uninsured—even if it’s only been for a short time—you will likely have to pay more when you start your next policy than you would have if there was no lapse in coverage.
9. Your Age
Did you know that your insurance rate is likely to increase when you reach age 60–70? Ask your insurance agent if there are any senior discounts available.
If you’re a teen or in your early twenties, your rates will be higher, as well. You can expect your rates to go down gradually when you’re between 25 and 30—as long as you keep a clean driving record.
10. Rising Costs
Another contributing factor could be climbing medical and repair costs in your area. Let’s say your insurance carrier had to pay out a lot of money in claims over the past year to cover medical expenses or auto repairs. If this is the case, they might raise premiums for their entire pool of policyholders for the next term.
If You Haven’t Had Any Accidents or Filed Any Claims
If you haven’t filed any claims in the last year and your premium still increased, you have a few options. If you want to stick with your current insurance company, you could choose a higher deductible to decrease your premium cost. Be sure and ask if there are any additional discounts available to lower your rates. You could also bundle your auto and homeowners insurance policies or sign up for a telematics program for safe driving discounts.
If the cost is still higher than you’d like to pay, it could be time to shop for a new policy with a different company. An independent insurance agent can work with you to find more affordable options and better coverage.
Coverage Direct is an independent insurance agency in Des Moines, Iowa. We’ve partnered with several top-notch insurance agencies to serve clients across much of the U.S. Contact us if you’d like to be matched with carriers that offer excellent insurance options at affordable rates.