Why Is My Auto Insurance Premium Increasing?

What is a premium?

A premium is the money that you, the consumer, pay for insurance coverage.

What determines premiums?

Insurance companies set premiums based on the expected cost of future claims. Personal risk factors, like those listed below, are considered when setting premiums.

Keep in mind that the determining factors may be different based on state laws. State laws require that rates cannot be excessive, inadequate, or unfairly discriminatory.

Auto Insurance Factors

• Your driving record, like traffic tickets and crashes.
• Your claims history.
• Where you live and garage your car.
• Your age or number of years of driving experience, gender, and marital status.
• The type of car you drive and the cost to fix or replace your car.
• Your selected coverage limits and deductibles.
• Your annual mileage.
• Your insurance score, which is a rating that determines how likely you are to file a claim. (This rating includes some credit-based factors.)
• Driving habits collected by telematics that monitor your daily driving patterns. Telematics is a technology used by insurance companies that is installed in your car and collects data on behaviors such as speeding, hard braking, acceleration, and turning corners too quickly.

Additional Factors

• Extreme weather events. Natural disasters are happening more frequently, and they are becoming more severe — even occurring in areas that haven’t been historically impacted. This can result in more damage to cars and more claims being filed.
• Construction and repairs, including the costs of labor and materials. These costs tend to be higher in more populated areas of the U.S. and higher when there is limited supply.
• Economic factors like inflation and interest rates influence real estate values and the price of goods.
• Increasing cost of litigation.
• Reinsurance costs. Insurance companies buy their own form of insurance called reinsurance. Reinsurance costs have risen significantly and are also impacted by the above factors.

How can I lower my premium?

• Shop around. Before you buy a policy, it’s a good idea to get quotes from several companies. Make sure you understand what coverages are included and that you’re comparing like policies.
• Increase your deductible, but make sure you have the money to pay out of pocket if you file a claim.
• Decrease your coverage on older vehicles. When your vehicle has little value, consider eliminating coverage like comprehensive or collision (paying for damage to your car).
• Bundle your auto policy with a homeowners or rental insurance policy.
• Ask for discounts for things like taking a defensive driving course, being claims-free, driving a vehicle with advanced safety features, or having an account with an affiliated credit union.
• Ask if telematics will decrease your auto premiums.
• Improve your credit and driving record.