Auto insurance

What makes car insurance premiums more expensive? Why they are increasing and tips for saving.

Owning or leasing a vehicle can be one of the most exciting steps for many drivers on the road, but it also comes at a cost that goes beyond the list price. One of the main costs that could cause you to slam on the brakes: your car insurance premium.

In fact, the most recent Consumer Price Index (CPI) shows auto insurance rates have increased by 10.3% over the past year. It’s just the cost you’ll have to pay to insure your vehicle. AAA’s 2021 Your Driving Costs study found that the average cost of owning and operating a 2021 model vehicle was $9,666 in 2021 when the vehicle travels 15,000 miles per year. And the average cost of insurance for all vehicles was $1,342.

Your auto insurance premium is not set in stone and could be significantly higher or lower than someone else’s premium depending on a number of different factors that insurers use to determine the level of risk they are taking in offering you a policy.

What kinds of factors determine your car insurance premium?

Your car insurance policy is an agreement between you and your insurer which states that in exchange for a regular premium, your insurer will cover the cost of any loss you may incur in the event of an accident. Your insurer assumes a certain level of risk when they decide to do business with you, so it’s important for them to check your driving history to determine how much they need to charge you to feel comfortable driving. assume this risk and cover your losses in the event of an accident. that you are filing a complaint.

A few personal stats they will evaluate include your…

  • Driving record
  • credit history
  • The make and model of your vehicle, as well as the mileage
  • Your location
  • Personal demographic data such as your age and gender

5 reasons why your car insurance premium may increase

Your car insurance premium can change for a number of reasons; some of them may be within your control and others may be a result of the environment you find yourself in. Identifying why your premium may have increased can help you develop a game plan to reduce it.

  1. You have had an accident or obtained a fine: Because your driving record plays a huge role in your premium, you can expect any negative rating to affect your premium. Insurers may consider you a high risk driver if you have been involved in an accident, even if the accident was not your fault. The good news is that many insurance companies only consider the last three to five years of your driving record when calculating your rates. And some insurers may offer accident leniency programs that let you relax and ensure your provider won’t raise your rate after your first accident.
  2. You live in an area where more claims are occurring: Even if you don’t file a claim, an increase in the number of claims in your area could cause your rate to increase.
  3. Inflation: No surprise here – when the cost of goods and services goes up, it can even impact your car insurance. “It may seem random, but insurance companies can raise prices for inflation adjustments, or if the business as a whole is experiencing higher than expected loss rates for all drivers,” says Nestor Hugo Solari , co-founder and CEO of Sigo Seguros, an insurance company. technology company providing affordable access to auto insurance for immigrant and working class communities.
  4. You no longer benefit from a reduction: If you got a lower rate when you first purchased your policy through a discount, you may see your rate increase when that offer expires. Say you got an employee discount and changed jobs, or you got a safe driver discount and had an accident.
  5. You have added a new driver to your policy: If you’ve added a new family member to your policy, your rate will likely increase due to the added risk of a second driver. The exact increase will depend on their age and driving history.

How to save on your car insurance premium

So your rate has gone up and you’re looking for ways to reduce your costs. How do you do? There are a few strategies you can explore.

  • Shop for a new policy: If you’ve been with your insurer for a while, it might be time to go back and get quotes from other insurers to see if you can get a lower rate. You should strive to do this every few years, as your personal and financial circumstances may have changed and this could significantly affect the amount you pay for your premium.
  • Change your coverage level: You might consider reducing your level of cover, although this will only save you money in the short term. This will have the most significant and immediate effect on your price, although it [does mean] less coverage in the event of an accident,” says Solari.
  • Consider a grouped font: Some insurers will give you a discount for buying more than one type of insurance policy from them, such as home and auto insurance, or auto and life insurance, etc. Analyze the numbers to see if grouping your fonts could help you save more than one individual font.
  • Increase your deductible: By opting for a higher deductible on your car insurance, you can significantly reduce the cost of your premiums. The tradeoff is that you’ll need to have enough money set aside to pay the higher deductible in the event you file a claim.
  • Work to increase your credit score: Your credit score is a key factor used by insurers to set your rate. Regularly checking your credit report for errors and maintaining positive habits such as on-time payments and low balances can help you keep your credit score in good shape and get a better rate.

The take-out sale

Your car insurance premium can go up for a number of reasons that aren’t always the result of your own actions. By regularly monitoring your bill, looking for discounts, adopting positive financial habits, and actively communicating with your provider for ways to save, you can ensure that your premium doesn’t overstretch your budget.

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