It’s the million-dollar question…meaning I’d have a million dollars by now, if I had a dime for every time a client has asked me this question in my 38-year career as an insurance agent! While the reasons may have changed a bit over time, the bottom line is that premiums can fluctuate more than you think. “Why is this”? and “What” can you do about it?
Why do auto premiums increase?
- Probably the number one reason is driving history – accidents and violations. Drivers prone to speeding, improper driving habits, and drivers causing accidents will pay higher rates than drivers who exercise safe driving practices.
- Claims activity will also cause rates to increase. Sometimes an accident is not due to human fault – maybe your auto is stolen, you hit an animal, or a thrown rock breaks your windshield. Filing claims, whether due to an at-fault accident or something beyond your control, can cause a loss of claims fee discounts, or make you ineligible for certain rate programs.
- Age is a factor in automobile rates – younger, less experienced drivers will pay a higher premium than seasoned, more experienced drivers. A lesser-known fact – senior drivers – over the age of 70 – will pay a higher rate than they did when they were younger – statistic tells us that older drivers have more frequent and more severe accidents than younger adult drivers.
- That new or new "er” automobile will cost more to insure than an older model. Sure the “bells and whistles” of new cars make them safer – automatic braking, parking assistance, lane change warnings, blind-spot monitors – but all of these features are driven by onboard computer technology – and technology costs more to repair/replace when damaged in an accident. A common argument here is – well, I don’t have a new or new ”er” car – but you might be involved in an accident with a new car – and your insurance pays for those repairs.
- The list can go on and on -
- Insurance company rate increases
- Rates change if you move into a more populated area
- Claims history for your region of the country (theft and pre-meditated hit and runs in larger cities)
- We all pay the cost for the uninsured driver that causes accidents
So that’s the “Why” – Now “What” can I do to minimize rate increases?
Here are things you can do to minimize rate changes:
- Keep that driving record clean! Be a thoughtful, defensive driver; put that cell phone down! Keep distractions to a minimum, stay within the speed limit, and don’t drive when you are overly tired or stressed.
- Defensive driving classes can help reduce your rates – from Driver’s Ed for the young driver to community classes for senior drivers – seek out opportunities to educate yourself and reduce your premiums.
- Mind your credit score – that’s right, your credit score! Most insurance companies employ a scoring model that considers the client’s credit history. Keep your scores high – to keep your premiums lower.
- If you are shopping for a different vehicle, ask your agent to give you rate comparisons to know what to expect ahead of the purchase. It’s hard to head off a huge rate increase on that new sports car once the dotted line is signed.
If you are going to shop for a new insurance company – remember this – insurance can be a daunting subject. The average consumer has minimal experience navigating the terms and nuances of insurance policies. Seek the advice of an experienced agent that understands how rates and coverages work together to give you the protection you need with a premium you can afford.