Why Do Auto Insurance Rates Go Up?
Why Do Auto Insurance Rates Go Up?
Auto insurance is your best defense when you’re driving on the road. It gives you the peace of mind that you are protected in the event of an accident. Once you have chosen the right amount of coverage, there’s a monthly premium that you pay each month. Insurance companies calculate premiums based on the coverage and the risk associated with the insured person.
If you see a jump in your car insurance rates, keep in mind that premiums aren't raised on a whim. To help you understand this matter, we break down the common factors that lead to the premium increase. Continue reading to learn more:
Speeding Tickets and Traffic Violations
Your driving record can greatly affect your monthly premiums. For example, multiple speeding tickets or a DUI offense means you’re more at risk of getting in a car crash. As a result of your violations, your insurance company will raise your car insurance premium to offset the increased risk. The more traffic violations you have, the higher the possibility that you’ll be charged for more auto insurance. Even a minor violation could result in higher rates.
To reduce premiums after a ticket, consider shopping around for a new policy. You should also drive carefully and be mindful when driving on the road. Many insurance companies offer the best rates to people with clean driving records.
Inflation
Inflation doesn't only affect goods and the products on our shelves. It can also drive higher insurance costs due to shortages in labor and car parts. Expect to pay more on auto insurance premiums as inflation continues to rise. Since inflation and the decline of purchasing power are beyond your control, you can keep your costs to a minimum by looking for discounts or signing up for a safe driving program.
More Vehicles and Drivers
Another factor that may affect your auto insurance premiums is adding vehicles and drivers. If you purchase a second car for another family member or teenage kid, your rate is likely to go up. The good news is that you can get multi-vehicle insurance discounts, which can help you save 15% on your premiums.
Frequency of Claims in Your Area
When calculating your risk, auto insurance companies will look into your neighborhood. Auto insurance costs may also vary depending on your location. Some states and cities have more expensive auto insurance premiums than others.
If you live in an area with higher auto theft or accidents, this could lead to higher insurance rates. The frequency and severity of claims in your ZIP code can also drive up the prices. But if you’re located in a lower-risk ZIP code, it’s possible to get cheaper annual rates.
Credit Score
One of the most crucial factors is your credit score. This can affect your car insurance premiums the same way your driving record. In general, some insurance providers pull drivers’ credit histories in determining car insurance rates. They typically use credit-based insurance scores to assess insurance risk and coverage.
Having a poor credit score could double what you pay for auto insurance. On the contrary, drivers with credit in good standing pay less. A higher credit score can potentially lower your premium because it means you can maintain stable financial health. If you have a high credit score, you are less likely to file a claim.
Age
Did you know that drivers between the ages of 15 and 20 were responsible for 7% of all fatal accidents? That’s why teenagers tend to pay more for auto insurance. They pay thrice the usual premiums of middle-aged drivers. Most insurance companies believe that you're more likely to get into an accident when you're young. To mitigate the risk, the insurance provider will raise premiums for teens with less driving experience.
Aside from teen drivers, 60-year-old drivers pay more for auto insurance. Seniors are considered to be risky drivers due to blurred vision and slow response time that may impair driving ability. Once you reach the age of 60, insurance rates begin to slowly increase as age.
Conclusion
At Local Retirement Group, our goal is to help you navigate the ever-confusing world of insurance. Not all insurance policies are the same, which is why you need to find the best coverage at the right price. Feel free to contact us today for all your insurance needs.
