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You just got your car insurance bill—and it's sky-high. What's behind the rate hike? Many factors influence the cost of car insurance, from where you live to the car you drive. Recent changes to your coverage, your household, or your driving record can all affect the price you'll pay for auto insurance. Here's what you need to know about insurance premium spikes.
9 Causes of High Insurance Rates
Here are common reasons your car insurance costs may rise and what you can do about it.
A Recent Accident or Claim
Whether or not you're at fault, being involved in an auto accident can cause a rate hike. Being deemed at fault could signal you're a risky driver, especially if you were under the influence. Even if you're not at fault, filing a claim—especially a large one—could lead to a premium increase.
If you've filed previous claims or been involved in other accidents, you're more likely to see your rates rise. That's because the number of claims and accidents on your record affects how risky the insurance company deems you. Still, you should always file a claim, even in a minor accident. Other parties in the accident could sue you later, and your insurance company may not honor your policy if you didn't report the incident.
A Traffic Violation
Simply getting a traffic ticket doesn't always prompt a premium increase. One minor moving violation on an otherwise pristine driving record might not affect your premiums one way or the other. But frequent citations, or a citation for unsafe driving behavior, such as driving under the influence or excessive speeding, will probably bump up your rates.
Adding a Teen or Young Adult Driver
Insuring teenagers and young adults under age 25 is expensive. Motor vehicle crashes are the second leading cause of death among teenagers. Teens are inexperienced drivers, and also tend to be impulsive and more likely to take risks behind the wheel. Since men of all ages statistically have more accidents and are more likely to drive under the influence than women, adding a young man to your policy can cause premiums to skyrocket.
Moving to a New ZIP Code
Where you live affects your insurance rates. Drivers in urban areas generally file more claims because population density increases the odds of car theft, vandalism and accidents. Your rates could also rise if you move somewhere prone to extreme weather conditions that can damage cars. If your new address requires parking your car on the street instead of in a garage, your rates could increase too.
A Lapse in Insurance
Going without car insurance—even during a period when you aren't driving or don't own a car—could translate to higher rates the next time you apply for insurance. If you have a vehicle but don't plan to drive for a while, maintaining your insurance protects the vehicle from theft, vandalism or weather-related damage, and can protect you from liability if you drive someone else's car or a rental car. Lenders generally require leased or financed vehicles to have some level of coverage, even when not being driven.
If you don't own a car, you can buy non-owner (sometimes called non-driver) insurance. This offers liability protection if you damage property or cause bodily injury while driving a car you don't own and may offer other liability coverage as well.
The more miles you drive, the more likely you are to have an accident. Have you recently started a new job with a longer commute? Are you returning to the office after working at home? Your rates may increase, especially if you previously had a low mileage discount.
Buying a New Car
An additional car will raise your insurance, of course, but replacing an older car with a newer one may also cause a rate hike. Newer cars cost more to replace if stolen and often have high-tech features, such as LED headlights or advanced driver assistance systems, that are pricey to repair. Vehicles popular with car thieves also have higher premiums. Before buying a new car, get quotes for various makes and models to see how your premiums may be affected.
After you turn 55, many insurance companies discount your rates. People in this age group typically drive less often and are safer drivers. But once you turn 70, your premiums are likely to increase again. Drivers over 70 are statistically more likely to be involved in major accidents as sight, hearing, mobility and reflexes may become impaired with age.
Married people are statistically less likely to file auto insurance claims, according to the National Association of Insurance Commissioners. If you're suddenly single, your rates might rise next time your insurance is renewed.
How to Lower Your Car Insurance Costs
Rising premiums don't have to take a bite out of your budget. Try these ways to save on car insurance:
- Eliminate nonessential coverage like rental car coverage or roadside assistance. If you have an older car, consider dropping comprehensive and collision coverage.
- Increase your deductible; just make sure you can afford to pay it if the need arises.
- If you drive fewer than 12,000 miles annually, investigate policies that base prices on usage.
- Are you a safe driver? Ask about apps that monitor your driving behavior in exchange for lower premiums.
- Bundle your car and home insurance with the same carrier.
- Investigate available discounts, such as for completing a safe driving course, getting good grades or belonging to certain associations.
- See if you can remove a traffic citation from your record by completing a driver safety class.
- Shop around with other carriers, comparing the same type and amount of coverage. You may get a lower rate by getting your quote online, for example.
- Find an insurance company that offers accident forgiveness.
- If you have a teen driver, try to assign the teen to your least valuable car to lower your rates. However, the teen may be required to drive only that car, or they won't be covered.
Credit Can Affect Car Insurance Rates
You may not know that credit can affect your insurance premiums. In every state except California, Hawaii, Washington, Michigan and Massachusetts, insurance carriers can check your credit-based insurance score when pricing your auto insurance. Boosting your credit score before looking for insurance may qualify you for lower rates. Get a free copy of your credit report and credit score. You can sometimes improve your credit score quickly by paying down credit card balances to lower your credit utilization.