Why do car insurance rates go up?

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Here's what you need to know...

  • Environmental and economic factors out of your control may make your insurance rates change.
  • Moving or being involved in an accident may cause your coverage costs to increase.
  • The type of coverage other people buy could have an impact on your premium costs.
  • There may be discounts that apply to you that could help your costs decrease.

Car insurance rates do change often for a multitude of factors and reasons. While it may seem daunting to keep up the ever-changing car insurance premiums, truly it’s just part of the insurance process.

If you changed insurance providers every time rates dipped or rose, you would go insane.

So, while it’s important to monitor rates and see what other car insurance providers offer, remember that all insurance companies change their premiums on a regular basis due to statistical data they are receiving and collecting constantly.

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What factors play a role in my car insurance rates changing?

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Here is a list of common reasons insurance premiums go up or down:

  • Change of address or location
  • Amount of crime in your area
  • The economy and inflation
  • Time of year
  • Types of insurance people are purchasing
  • Recent accident

Why is changing my address going to affect my car insurance rates?

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Understand that almost everything is analyzed when it comes to insurance rates. Ultimately, an insurance company’s job is to make money.

So, even though they are providing you with coverage in the case of an incident with your vehicle, the amount they are charging you for this service is dictated by what the risk is for them.

The higher the insurance company feels the risk is, the higher the premium rates will be.

Changing your address can be a positive, negative or non-factor in regards to your premiums. If you are moving from a crime-riddled area to a safer neighborhood where less automotive theft occurs, this could reduce your rates.

If you are moving from a safer neighborhood to a higher crime rated area, the opposite would be true.

The average age of your area may factor into your rates changing. If you live in a community where the average age is 45 compared to a community where the average age is 25, this could play a part in the changing of your insurance rates.

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How does the economy cause my car insurance rates to change?

In a tough economy, less stable insurance companies may have to raise their rates to offset the event of people filing claims.  An increase in claims could cause the insurance company’s financial backing to be in jeopardy.

If an insurance company has a strong financial foundation when the economy is tanking, they may be forced to lower their rates to become more competitive with other financially stable insurance providers.

When the economy is healthy, financially strong insurance providers may raise their rates a bit.

At the same time, the less stable companies who were worried about closing their doors and had to raise their premiums would once again lower them because of a more stable economic future.

How does the time of year affect how insurance rates change?

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There is a metric that actuaries (people who analyze risk for financial security programs and businesses) analyze when recommending rates for your car insurance.

In the summer there are more teenage drivers and college kids driving more regularly or getting their licenses; hence, because younger drivers are a higher risk than drivers over 25, premiums at this time may rise.

In the fall, there are many end-of-year sales on vehicles.  Due to the spike in new vehicles, which usually are more expensive than used or existing vehicles, rates may spike during this time period.

What types of insurance affect my rates?

If a higher number of people are buying higher-end car insurance (comprehensive) compared to basic liability coverage, rates will decrease.

The reason being, if the insurance company is having a higher percentage of people purchase more coverage, the pendulum of risk swings in their favor a bit more, and they can provide a lower rate on all insurance plans.

State car insurance laws help dictate the cost of the most basic form of required coverage which is liability. You will see more variation in cost in the options such as full coverage, uninsured motorist coverage, and collision coverage.

How does inflation affect my car insurance rates?


As inflation occurs year after year, all businesses need to adjust rates and prices for their products and services. This rings true for auto insurance providers.

With rising costs in medical care, car repairs and the overall cost of doing business, insurance premiums need to keep up.

If you combine a bad economy with high inflation you have more people out of work and trying to cut costs. Sometimes this means lowering their insurance coverage or driving without car insurance.

If people have little or no insurance coverage, the insurance companies have to factor in these elements when assessing what their premiums need to be to keep their heads above water.

Is there anything that can cause my insurance rates to actually decrease?


Yes, there are several different instances in which your insurance rates might decrease. Typically, these rate decreases do not happen often, but just once a year at the most.

  1. Maintaining a clean driving record with no accidents and no moving violations may cause your car insurance rates to drop since drivers with a clean driving record are considered less of a risk to insurance companies. The insurer may evaluate the driver once a year to determine he qualifies for a reduction in car insurance rates.
  2. Completing a defensive driving course may qualify you for a rate decrease.
  3. Being a teenager with a “B” average or higher could get you the good student discount which could save you up to 10%. However, this is a discount credited at the beginning of the year and will not change often.
  4. Purchasing a car with more advanced safety features could help your rates to decrease.
  5. Getting married may impact your insurance costs in your favor.
  6. Insuring multiple items from your insurance company may help you save money.

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