Why did my car insurance enhance my charges? – Kelley Blue Ebook
It's common for insurers to raise car insurance rates after you've had an accident, file a claim because a tree landed on your vehicle, or had an unfortunate encounter with a deer. But sometimes prices can go up without warning.
The insurance company can increase your rates for many reasons, some of which have nothing to do with your driver's license or your claims history. For this reason, it is important to understand why you need to know what auto insurance policies cover and what factors insurers use to determine your premium.
What does my car insurance protect me from?
Car insurance helps pay for things like accident-related medical expenses, property damage, and litigation. Depending on which state you live in, it can also help pay for lost wages and funeral expenses. In general, there are six main types of auto insurance coverage.
- Liability for injuries. If you are responsible for the injury to someone in a car accident, this coverage will help pay the medical bills for the driver and passengers in the other car.
- Liability for property damage. Protects you if you are to blame in an accident and damage someone else's vehicle. It can also cover damage you cause if you collide with other types of property like a shed, fence, or even someone's porch.
- Medical Payments / Personal Injury Protection (PIP). This type helps pay for injuries you and your passengers suffer in an accident.
- Collision. Whether you're hitting another car, a phone pole, or a fence, a collision pays off to fix your vehicle.
- Full. Not just a collision can damage your car. Comprehensive pays the repair or replacement costs if your vehicle is damaged by a wide variety of breakdowns, including hail, earthquakes, storms, theft, vandalism, and more.
- Uninsured / underinsured drivers. Not everyone has insurance, although this is a legal requirement in most states. If you are hit by an uninsured or underinsured driver, this coverage comes in to cover repairs and medical bills.
Some auto insurance policies are required by law. Others are optional and vary by state. However, if you skip the optional insurance where you live, you might not be covered if the unexpected happens.
Why has my car insurance rate increased?
You probably wouldn't be surprised if your premium increased after an accident. But even if you have a clean driving report, the insurer can increase your car insurance rates, and there can be many reasons for that.
Auto insurance companies may be responsible for paying various expenses, including medical bills, legal fees, and vehicle repair and replacement costs. When an insurer's business costs generally increase, they can increase your premium to offset their expenses.
It is not uncommon for insurers to increase car insurance rates when thunderstorms or the number of accidents in your area have increased. Both of these increase the likelihood that the insurance company will have to pay out a loss.
What if you get into an accident?
Some insurance companies offer accident forgiveness, although you may pay extra for this protection. If your insurance policy includes accident forgiveness, your rates cannot be increased after an accident. But if it doesn't offer accident forgiveness, there is a good chance your rates will go up. According to Savvy data, post-accident rates increase an average of 6 to 10 percent.
Whether the insurance company increases your premium usually depends on how serious the accident was, who was to blame and where you live. The amount of the increase varies depending on your insurer, your age, and your overall driving history.
Factors Affecting Auto Insurance
Insurance companies use many different factors to determine car insurance rates, and the criteria they use can vary from one insurer to another.
What you can control
While a rate hike is unlikely to be welcome news to anyone, some of the factors insurers use to determine premiums remain in your control.
- Driving report. Drivers without accidents, speeding or other traffic violations pose a lower risk for insurers and generally receive lower rates than people with a spotty driving history.
- Claims history. Your claims history is not just about whether or not you had an accident with another vehicle. Any claim you submit could affect your reward, whether your vehicle fell into a hole in the ground or a stone struck your windshield.
- Recognition. Your credit doesn't just affect the interest rate you get on a loan. This can also affect your insurance rates – if you live in a state where insurance companies can use credit-based insurance ratings in their evaluation criteria. People with a higher credit score usually qualify for lower insurance rates.
- Late payments. If you don't make your payments on time, your insurer can increase your car insurance rates.
- The car you drive. Some cars cost more to fix. If you drive one of these, you will likely pay more.
- Who is in your policy? Adding a driver, especially a teenage driver, to your policy increases your rates.
What you can't control
While it would be nice to be able to control all the factors that affect your insurance rates, unfortunately you cannot. Here is a list of factors that there is nothing you can do about.
- Age. Insurance companies view younger and older drivers as a higher risk, and their premiums reflect this as statistics show that they tend to have more accidents.
- The number of driving years. The less experience you have, the higher your premium can be.
- Where you live. Theft, vandalism and accident rates are higher in some areas. If you live in an area where the insurance company is more likely to pay out damages for any of these incidents, your tariff will usually be higher.
How to Lower Car Insurance Tariffs
Whether or not you are affected by a pay rise, there are a few ways you can lower your premium.
- Increase your deductible. In general, higher deductibles lead to lower premiums and vice versa. However, when increasing your deductible, it is important to make sure that you can pay it in the event of an accident.
- Shopping spree. Insurance carriers weight criteria differently when setting tariffs. So it's worth comparing quotes from a few different carriers to make sure you're not overpaying.
- Take advantage of discounts. If you don't ask, you may not know what is available. Inquire with your insurer about the discounts offered.
- Drive less. If you don't put a lot of miles on your car, you may be able to save money with a pay-per-mile plan instead of traditional auto insurance.
Discounts on car insurance
Car insurance companies offer a variety of discounts that can help lower your rates. The discounts vary depending on the insurer, but common ones are:
- Multi-vehicle. Many insurance companies will give you a discount if you insure more than one vehicle with them.
- Multi-politics. You've probably heard of bundling your home and auto insurance together. Insurance companies often offer discounts if you buy more than one policy.
- Safe driver. Many companies give discounts to drivers who have a clean driving report. Some also offer discounts for taking safe driving or defensive driving courses.
- Good student. If you have a high school or college student on your policy, a good student discount can help you save. Your child will likely need to meet a minimum grade point average to qualify, which may vary by insurer.
- Usage-dependent discounts. If you're ready to download an app and have your insurance company track your driving behavior, you might be able to save. These programs can help reduce your premium depending on how and how much you drive.
- Homeowner discount. Own instead of rent? In this case, you may be entitled to a discount even if your home insurance has been taken out with another company.
If your rates have gone up despite a clean driving report, it may be time to see if you can find a better rate for comparable coverage with another insurer.