Last updated: August 2022
It’s renewal time for your car insurance policy. You’re ready to pay your premium, but when you see the bill, your rates have increased. Why did my auto insurance go up, you ask yourself. Here are the main factors all insurance companies may use to determine rates. And because Direct Auto always tries to keep costs down, we’re also sharing some ways you can try to keep your coverage more affordable.
7 Factors That Could Influence a Car Insurance Rate Increase
Before you understand rate fluctuations, it’s important to know how rates are determined in the first place. These seven factors play a major role in how much your car insurance costs.
1. Your Demographics (Based on What’s Permitted)
Older drivers typically have cheaper insurance premiums than teenage drivers. Why? The more experience you have at anything (whether it’s cooking, driving, or playing a sport), the better you tend to be at it. When it comes to driving, insurers would rather provide coverage to someone they believe is less likely to get in a crash due to years of practice behind the wheel.
Some states use gender (others have laws preventing it) to help determine your auto insurance rate, and men typically pay a higher premium (although the difference is slight, according to Value Penguin). Why? The Insurance Institute for Highway Safety reports men typically drive more than women, are involved in more fatal accidents than women, and are more likely to engage in dangerous driving behavior (like not wearing a seat belt or speeding).
You might also pay less for coverage if you’re married because married couples are often perceived as a lower risk.
2. Your Driving History
Before insurers agree to cover you, they check your driving history. They want to know if you have been convicted of a DUI/DWI, if you have a history of moving violations, file claims frequently, and more. If you have a clean driving record, you’re more likely to secure a lower premium.
3. Where You Live & Drive
Do you live in a heavily populated area with lots of traffic and crime? If so, you could be paying more for auto coverage. Insurers see busy streets as an opportunity for more wrecks. And if crime is high, they could be worried about break-ins, theft, and vandalism. The number of miles you drive could also impact your rate. Why? When you drive more, you’re more likely to have a chance of being involved in an accident.
4. Your Work
If you use your car for work, other than commuting, you might need an appropriate commercial auto insurance policy on your vehicle. This could drive your rates up.
5. Your Vehicle
New and specialized vehicles often have a higher value and are more expensive to repair or replace than older models. The age of the vehicle, its body type, and its safety ratings help insurers determine rates.
6. The Coverage You Select
Did you choose minimum liability coverage? Are you required to carry comprehensive coverage and collision coverage by your lender? The amounts of coverage and types of coverage you choose heavily influence your rates. As you increase your level of protection, the more you can typically expect to pay.
7. Credit History
If you have a history of poor credit and missed payments, insurers will assume you’re more likely to let your coverage lapse. As a result, you could pay more for coverage if you have a low credit score. Try to make on-time payments to avoid paying more in the future.
Why did my insurance go up at renewal?
There are plenty of things that can cause rate increases at policy renewal time. Most frequently, they’re a result of a change in one of the factors above. If you added an inexperienced driver to your policy, moved ZIP codes, or were involved in an accident, there’s a chance your rate could increase. Here are six situations that lead people to question if an auto insurance rate increase is coming.
1. Does your car insurance go up when you get a ticket?
Good news: Being issued a ticket by a law enforcement officer doesn’t necessarily result in a premium increase. A premium increase will depend on how your insurance company views various traffic violations. Your insurer will weigh a variety of factors. For instance, how serious is the situation? If you were flagged for a minor infraction like failing to yield the right of way or driving with a broken headlight, you might avoid a rate increase. But if you were speeding at 85 mph in a school zone — you may see your insurance costs go up!
Bad news: If you’re slapped with a ticket for a serious violation like drunk driving, your premium might go up upon policy renewal, since your insurer may consider you to be a high-risk driver. The same is generally true if you get three traffic tickets within a three- to five-year period.
The best defense against a ticket-related increase in your car insurance is to obey all traffic laws when you hit the road. Some insurers reward safe drivers with discounts and savings!
2. Does your car insurance go up when you get a new car?
There’s no single answer to this question. Your car insurance premium depends on various factors, including how much the car costs, how much it would cost to fix it, how safe it is, and how likely it is to be stolen.
Bottom line: You might end up paying less for car insurance if your car is inexpensive and safe. However, sometimes it could cost more to insure an older car than a newer car due to new developments in road safety and anti-theft technology! Before buying a new or new-to-you car, get a car insurance quote and check if your premiums will increase or decrease. Doing so will help you see how the ongoing expenses for your new car will affect your monthly budget.
3. Does your car insurance go up when you make a claim?
The short answer: It might.
If you file a claim after an accident or other mishap, there's a chance your insurer will increase your premium, particularly if you’re at-fault for the incident or if the claim is especially expensive. How much? The amount varies based on which insurance company you use, the type of coverage you have, and your driving record. Generally, a claim-related premium increase stays on your policy for three to five years.
To steer away from a claim-related rise in your insurance premium, consider whether you can pay to fix relatively minor damage to your car out of your pocket.
4. Does your car insurance go up when you have an accident?
If the accident wasn’t your fault, you don’t necessarily need to worry about an increase in your insurance premium. However, if you are found to be at fault, your insurer might consider you a riskier driver, in which case your premium may go up when you renew your policy.
Remember that you should always report an accident to your insurer, even if you don’t wind up filing a claim. Why? Two reasons. One, if you don’t report it but decide to later, your insurance company could deny coverage. Two, if you don’t report the accident and are sued by the other parties involved, you could have to pay for your legal defense and any damages out of your own pocket. Neither situation is one you want to be in.
The best way to prevent an accident-related increase in your premium is to be a good driver. In fact, an accident-free driving record might lead to a nice insurance discount. You could also see if your insurer offers accident forgiveness.
5. Does your car insurance go up when you move?
Since insurers partly base your rate on your home ZIP code, a move to a new place could result in an increase or a decrease in your premium. This is because different ZIP codes are riskier than others, based on different rates of car accidents and car thefts.
Before relocating to a new place, consider how much the move might affect your car insurance premium. It’s also worth noting that if you move to a new state, they have their own car insurance laws. You might need to increase your level of coverage to meet their requirements, or you might be able to do the opposite and still be legal. Either way, changes to your coverage could affect your premium.
6. Does your car insurance go up when you get married?
Getting married might cause your car insurance to go down, not up. How does that work? Statistically speaking, married motorists are less likely to get involved in car accidents than their single counterparts. Therefore, married drivers are sometimes seen as less of a risk and might enjoy lower premiums. If your spouse has a less-than-perfect driving record, talk to your agent about what options you have, like a multi-car car discount, to find the best rate.
Why did my car insurance go up for no reason?
Sometimes none of the situations above apply to you. How is it possible for your rate to increase if you didn’t get in an accident, receive any tickets, adjust your coverage, or move to a new location? Well, the Insurance Information Institute says there are several factors outside of your control that insurers might respond to by raising rates, including:
- A low unemployment rate means more people are commuting to and from work, and more road traffic often leads to more wrecks.
- Rising medical costs and auto repair costs mean insurers often must cover higher bills.
If you feel like your rates went up unfairly, talk to your insurance agent to see what you can do to counteract a premium increase.
Factors That DON’T Raise Your Rates
There are some myths out there about insurance. Contrary to what you’ve heard, these factors do not impact your rates.
1. Car Color
The “red car” insurance myth is one of the most prevalent, and it’s entirely false. (Just ask the Insurance Information Institute.) The fact is, the color of your car has no bearing on the rate of your premium. So, what about your car does affect your premium? Some of the most common traits that insurance providers will take into account are a car’s age, make, model, engine size, and body type.
2. Increasing Age (Until You’re a Senior)
Contrary to what some people might think, car insurance often gets cheaper as you get older. If you have a clean driving record, you’ll likely pay less for coverage as you get older. A driver with a good record and 20 years of experience is typically seen as less risky to an insurer than a 17-year-old who is just starting to drive.
It is worth noting that at some point (Value Penguin says around age 60), rates do start to increase again for senior drivers. However, drivers over a certain age (the exact age depends on the insurer) are often eligible for senior citizen discounts on coverage that could help offset rising premiums.
Give us a call if your life has changed or is about to change. We’ll help you understand what affects your car insurance rates specifically and what you can do to keep them as low as possible, especially if you're wondering why is my car insurance so high. Call or come into your local Direct Auto today.