3 Reasons Your Car Insurance Price Goes Up – Hey, today we’re going to talk about: why did my auto insurance price go up? Man, I get this question all the time, why did my auto insurance go up? I didn’t have any accidents, or any of that kind of stuff, why did it change? And this article, I hope, will answer that question, for all of you. So, let’s dig right into it.
We’ll dig into the most common reasons your auto insurance price can go up, and there are really three, two of them being more common, than the third. The first one is, very simply, a rate change, we’ll talk about that.
Loss of discount, or discounts, and, then, coverage changes. So, those three things are the most common things that can change, in your policy, and make your price go up, or down, and, we’re going to talk about each of those, right now. But first, you need to understand a key term, and that key term, is the word renewal.
3 Reasons Your Car Insurance Price Goes Up
A renewal, in insurance, is the end of one insurance policy term, and the beginning of a new one. So, every time you get your insurance policy, your auto insurance policy will have some dates on there.
Depending on the term, it could be six months, or a year are the most common. There are other kinds, too, but usually six months, or a year, are the ones you’ll have. And at the end of each of those terms, a new one will start.
And when one term ends, and a new term starts, that is called a renewal, so that’s a key term we’re going to use, throughout this video. Like I said, most commonly every six months, or one year, there are shorter ones out there, but, they are not very common.
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So, let’s talk about the first reason your premium may have gone up, and, that is, simply, a company rate change. At each policy renewal, companies have the right to change the rate they charge. This can be based on quite a few things.
The most common thing that it’s based on, is claims paid out in the previous term. If a company sees that they’re paying out a lot of claims, and ultimately losing money, then they’re going to raise the prices of those policies, so that in the next term they can make back the money they lost. So, they want to try and balance claims going out, with a premium coming in, or the price of your policy coming in, and if they feel like they’re losing money, then they’re going to increase premium, so that they can try and make that money back.
So, a lot of times, that’s what happens. It could be the general profitability of the company.
Sometimes, companies are losing money on something else, not auto insurance, maybe it’s just poor management, or all kinds of different things, and they are going to increase the price you pay, in an effort to try and fix that. You know, every company is managed differently, and some are managed well, and, some are managed not as well. So, companies have to make decisions, and sometimes that’s based on the general profitability of the company.
Whether the company wants to grow, or shrink, in your area. Believe it or not, companies make decisions about certain areas of the country, and say, you know, we just don’t want to get any bigger, in that space.
We’ve got a lot of policies there, we don’t want to get any bigger. So, we’re going to start increasing our premium, in that area, and what’s going to happen? People are going to leave, or new people certainly aren’t going to come in the door. And, so, that company is not going to grow, in that area, and likely they will shrink. So, sometimes the price changes, or price increases, have everything to do with the company just wanting to shrink, in your area, or not grow, in your area.
And, kind of, almost anything else. Now, companies do have to propose their rate changes, to a State Board of Insurance. So, they can’t just radically change their insurance premiums all the time, for no reason, and have it move all over the place, but they can, really, make insurance premium decisions based on almost anything. They do, though, have to make sure the Insurance Department is OK, with that change. So, company rate change, a huge reason why your prices could go up, at a renewal.
So, here’s a rookie mistake, at least in my opinion, purchasing a six month policy, instead of a 12 month policy.
I think six month policies are to the advantage of the insurance company, and to your disadvantage. Why? Well, it gives them twice as many opportunities to change your premium. It gives them twice as many chances to increase your premium, because of something, and that is most often what happens.
Are there times when premium goes down? Sure, there are, and I see that happen all the time. But, it’s more common that premium is going to go up, and, so, a six month policy gives the insurance companies twice as many opportunities, to make that premium change. So, in my opinion, pick a 12 month policy, as opposed to a six month policy.
Reason number two, that prices go up, are a loss of discounts.
Now, insurance is based on discounts. I mean, discounts are everything, in insurance. And if you lose one, your price goes up. Now, I’ve created a video, that’s called The Eight Most Common Discounts for Auto Insurance. And you should definitely check that video out, on our YouTube page, in the auto insurance playlist, and it’ll dig more deeply into what these discounts are that you could lose, but, I’m going to go over them really, really quickly here.
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So, the eight most common discounts are a safe driving discount, the accident-free discount, credit, your credit score, the multi-s, multi-car, and multi-policy, those two different kinds of multi-s. Age and gender, believe it or not, affect your premium. A paid in full discount, if you’re willing to pay the whole policy, in full.
Loyalty discounts, and introductory discounts, kind of opposite things, there, but, those are discounts as well, and, finally, association, or job discounts.
So, number two is loss of discounts. And the third one, not as common, but certainly worth mentioning, is coverage changes, in your policy. So, insurance companies can change the coverage options they offer you, when a renewal comes up.
This doesn’t happen a lot, but it can be confusing, and hidden, in the renewal documents. So, insurance policies could decide, for example, that they wanted to increase deductibles, that they were no longer going to offer anything less than a 250 dollar deductible.
I mean, it doesn’t happen very often, but, you know, knowing what coverage you have, and making sure you understand it, at each renewal, super important, and something that all of your insurance agents should be willing to help you understand. All right, so what did we learn? Well, we dug into the most common reasons your auto insurance price can go up, and those three are rate change, just, simply, the insurance company increasing the rate.
Loss of discounts, something changed, in your scenario, and that discount came off, and, therefore, your price went up. And, finally, coverage changes, some coverage that the insurance company decided they don’t want to offer anymore, and so they could change your coverage, sometimes making it worse, without making your price better, ultimately you end up with something worse, for the same price.
All right, that was the end of that.
