Why Do Car Insurance Rates Go Up?

Insurance Q&A: “Why do car insurance rates go up?”

Though it seems like car insurance rates are always on the rise, we actually have a lot of control over what we pay and whether or not that rate will increase over time.  We determine our driving record, what car we drive, and any change in coverage or deductible.

Some of the main rating factors auto insurers use to determine what to charge for car insurance include the MVR, C.L.U.E. report, vehicle history and financial responsibility reports. Each ticket you receive and every claim you file, as well as your overall financial health, will show up on these reports.

It is most common for insurance companies to look at a five or three year history to determine your rate, though this depends on the type of car insurance company you choose.  The best way to avoid rate increases is to drive safely and keep financially fit.

Your policy cannot be cancelled mid-term based on the information in these reports, but you can certainly expect to be non-renewed or charged more on your next policy term.  This type of rate increase is associated with liability insurance.

The type of car you choose to drive may also increase your insurance rate.  If you purchase a newer or more expensive vehicle, be sure to factor in an insurance rate increase into your budget.  We also tend to file more claims to repair newer or more expensive vehicles.  More insurance claims always equal higher insurance rates.  This type of increase is associated with physical damage coverage.

Also under our control is the amount of liability coverage we elect to receive; almost every state has mandatory minimum liability limits, but we have the option to increase that amount, which will certainly make your car insurance rate go up.

You also set the deductible for physical damage coverage; if you decrease your deductible, you can expect to pay more for your auto insurance.  Lower deductibles tend to correlate with more claims, as drivers pay less money out-of-pocket for repairs.

Keep in mind that you can always speak with your insurance company or get an online quote to ensure you aren’t being overcharged for your car insurance.

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This post was written by The Truth Team on October 4, 2009 Comments (0)