Why Did My Car Insurance Company Raise My Rates? | Kelley Blue Book
It’s common for insurers to raise car insurance rates after you’ve been in an accident, filed a claim because a tree landed on your vehicle, or had an unfortunate run-in with a deer. But sometimes rates can increase without warning.
The insurance company may raise your rates for many reasons, and some of them have nothing to do with your driving record or claims history. This is why it’s important to understand why you need to know what car insurance covers and the 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 lawsuits. It may also help pay for lost wages and funeral expenses, depending on what state you live in. In general, there are six main types of coverage for auto insurance policies.
- Bodily injury liability. If you’re responsible for injuring someone in a car accident, this coverage helps pay the medical bills of the driver and passengers in the other car.
- Property damage liability. Protects you if you’re at fault in an accident and damage someone else’s vehicle. It can also cover damage you cause if you crash into other types of property, such as a shed, fence, or even someone’s front porch.
- Medical payments/personal injury protection (PIP). This type helps pay for injuries you and your passengers sustain in an accident.
- Collision. Whether you hit another car, telephone pole, or fence, collision pays to repair your vehicle.
- Comprehensive. Getting into a collision isn’t the only thing that can damage your car. Comprehensive pays the repair or replacement costs if your vehicle is damaged by a variety of mishaps, including hail, earthquakes, windstorms, theft, vandalism, and more.
- Uninsured/underinsured motorist. Not everyone has insurance, even though it’s the law in most states. If an uninsured or underinsured driver hits you, this coverage kicks in to help cover the cost of repairs and medical bills.
Some car insurance coverage is required by law. Others are optional, and it varies by state. However, if you skip optional insurance where you live, you may not be covered if the unexpected occurs.
Why Did My Car Insurance Rate Increase?
You probably wouldn’t be surprised if your premium increased after an accident. But even if you have a clean driving record, the insurer may still raise your car insurance rates, and there could be many reasons why.
Car insurance companies may be responsible for paying for various expenses, including medical bills, legal fees, and vehicle repair and replacement costs. As an insurer’s cost of doing business increases across the board, they may increase your premium to help offset their expenses.
It’s not unusual for insurers to raise car insurance rates if there’s been an uptick in severe weather events or the number of accidents in your area. Both increase the likelihood that the insurance company will have to pay out a claim.
What Happens 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 may not increase after an accident. But if it doesn’t offer accident forgiveness, there’s a good chance your rates will rise. Rates increase an average of 6 to 10 percent after an accident, according to Savvy data.
Whether the insurance company increases your premium typically depends on how serious the accident was, who was at fault, and where you live. The amount of the increase varies by insurer, your age, and your overall driving history.
Factors That Affect Car Insurance
Insurance companies use many different factors to determine car insurance rates, and the criteria they use may vary from one insurer to another.
What You Can Control
While a rate increase probably isn’t welcome news for anyone, several of the factors insurers use to determine premiums remain within your control.
- Driving record. Drivers with no accidents, speeding tickets, or other moving violations on their record represent less of a risk to insurers and generally receive lower rates than people with a spotty driving record.
- Claims history. Your claims history isn’t just about whether or not you’ve been in an accident with another vehicle. Any claim you file may impact your premium, whether your vehicle fell into a sinkhole or a rock went through your windshield.
- Credit. Your credit doesn’t just affect the interest rate you receive on a loan. It may also affect your insurance rates — if you live in a state that allows insurance companies to use credit-based insurance scores in their rating criteria. People with higher credit scores typically qualify for lower insurance premiums.
- Late payments. If you don’t make your payments on time, your insurer may raise your car insurance rates.
- The car you drive. Some cars cost more to fix. If you drive one of them, you’ll probably pay more.
- Who’s on your policy. Adding a driver, especially a teenage driver, to your policy will increase your rates.
What You Can’t Control
While it would be nice to control all the factors that influence your insurance rates, unfortunately, you can’t. Here’s a list of factors that you can’t do anything about.
- Age. Insurance companies consider younger and older drivers to be a higher risk, and their premiums reflect that because statistics show they tend to get in more accidents.
- The number of years driving. The less experience you have, the higher your premium can be.
- Where you live. Some areas have higher rates of theft, vandalism, and accidents. If you live in an area where the insurance company is more likely to pay out a claim for one of these incidents, your rate will typically be higher.
How to Lower Car Insurance Rates
Whether you’ve been hit with a rate increase or not, there are some ways you may be able to lower your premium.
- Raise your deductible. In general, higher deductibles result in lower premiums and vice versa. But if you increase your deductible, it’s important to make sure you can afford to pay it if you’re in an accident.
- Shop around. Insurance carriers weigh criteria differently when determining rates. So it’s worth comparing quotes from a few different carriers to ensure you’re not overpaying.
- Take advantage of discounts. If you don’t ask, you might not know what’s available. Be sure to ask your insurer about the discounts they offer.
- Drive less. If you don’t put a lot of miles on your car, you might be able to save money with a pay-per-mile plan instead of a traditional auto insurance plan.
Car Insurance Discounts
Car insurance companies offer a variety of discounts that can help reduce your rates. Discounts vary by insurer, but common ones include:
- Multi-vehicle. Many insurance companies give you a discount if you insure more than one vehicle with them.
- Multi-policy. You’ve probably heard about bundling your home and auto insurance. Insurance companies often offer discounts when you buy more than one policy.
- Safe driver. Many companies provide discounts to drivers who have a clean driving record. Some also provide discounts for taking safe-driver or defensive driving classes.
- Good student. If you have a high school or college student on your policy, a good student discount can help you save. Your child likely needs to maintain a minimum grade point average to qualify, which may vary by insurer.
- Usage-based discounts. If you’re willing to download an app and let your insurance company track your driving behavior, you may be able to save. These programs can help reduce your premium based on how and how much you drive.
- Homeowner discount. Do you own instead of rent? If so, you may qualify for a discount, even if your homeowner’s insurance is with a different company.
If your rates have increased despite a clean driving record, it might be time to shop around to see if you can find a better price for comparable coverage with a different insurer.
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