When do auto insurance premiums go up?

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Here's what you need to know...
  • When risk changes, which can happen quite often, so will your car insurance premiums
  • Car insurance rates are based directly on the safety record and the claims record of the vehicle make and model that you are covering
  • If the company has discovered that you have been cited or you have an accident during the term, the rates will not change until your next renewal is underwritten and the reports are run

Auto insurance premiums change on a regular basis for a multitude of different reasons.

If you have recently received a new renewal bill, or you are curious to learn what you should expect as you are buying coverage for the first time, learning what  factors can lead to a rate increase is important.

You will also need to familiarize yourself with when during the life of your policy the rates can be changed. Read this guide to auto insurance premiums increases, and find everything that you need to know in one source.

Start comparing rates now by entering your zip code below!

Why can an insurance company raise your premiums?

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Auto insurance premiums are all based on risk. If you are considered to be a risky driver or you purchase a risky vehicle, your likelihood of filing an insurance claim for an injury loss or a loss resulting in damage can be very high.

When you apply for coverage the first time, your application will be fully underwritten to determine if you are a high-risk driver or not. There can be quite a list of reasons why you will be found to be a high-risk household.

Here are some of the many reasons that your risk classification can become expensive:

  • You are convicted of more than one minor moving violation
  • You experience an at-fault accident that exceeds the damage threshold in your state
  • You are convicted of a major violation like DUI or reckless driving
  • You are inexperienced behind-the-wheel
  • You have a lapse in coverage
  • You have poor credit

You do not have to be considered a high risk for your rates to increase. In fact, you can still be rated as a standard risk and watch your rates climb up gradually.

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Adding a Vehicle With a Higher Classification

When you add a vehicle to your policy, you expect the rates to go up. When you replace a vehicle after trading your old car in, you might be shocked to learn that your rates have gone up.

Car insurance rates are based directly on the safety record and the claims record of the vehicle make and model that you are covering.

After reviewing structural design, crashworthiness, safety features, and cost to repair the vehicle, the insurer will assign a classification.

If lacking in safety features, the rates increase and will reflect in your premiums immediately.

If the car you are buying is lacking in safety features or it causes significant damage in accidents, the rates for physical damage, bodily injury or property damage may be higher.

Adding a New Driver to the Policy

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Adding a new driver to your plan does not always increase your premiums, but there is a chance the addition will. If you are adding a driver who is inexperienced or who have accidents and tickets, they become a risk even if they are not primary drivers.

You should find out what blemishes are on a driver’s record and how this person might affect premiums before you add them. The rates will also go up immediately when new drivers are added in the middle of a term.

When a listed driver on the policy is cited for a moving violation or is found to be negligent for an accident, it will most definitely lead to a premium increase.

Some drivers with years of experience may be eligible for accident forgiveness which means that the rates will not go up the first time it happens.

A majority of companies will process a rate hike with a surcharge.

The surcharge is based on the severity of the violation or the type of accident.

Minor violations will result in a small surcharge of three to 10 percent, but major violations like a reckless driving conviction can increase rates by an average of 22 percent. Penalties for already high-risk drivers, like teens, may be even higher.

A Change in Usage or Mileage

Another factor that affects insurance rates is usage. If you drive to work, you are considered a higher risk than a person who drives for pleasure to run errands or to go to recreational activities.

When you change jobs, move to a new home, or you start to commute to work after working from home, your rates will go up after you notify your insurer.

The average mileage driven in the US is between 12,000 and 15,000 miles per year.

In addition to usage, your rates can change when your mileage changes.

If you are rated as a low mileage driver and your odometer reading shows that you drive more than the estimates you have provided, you can see a jump in premiums.

This may become a surprise, but it is because you’re exposed to more risks on the road when you drive more miles.

When can an insurance company process rate changes?

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Insurance companies cannot process all premium increases whenever they desire. Your rates could change immediately if you change your policy by doing any of the following:

  • Adding a driver
  • Changing your zip code
  • Updating your usage
  • Changing vehicles

If the company has discovered that you have been cited or you have an accident during the term, the rates will not change until your next renewal is underwritten and the reports are run.

Now that you know why premiums can go up and when these changes will be processed, you are equipped to better handle rate jumps.

If nothing has changed and your premiums have gone up, there is a chance that there was a company-wide rate increase filed with the Department of Insurance.

To find the best rates, use our FREE rate comparison tool by entering your zip code below!

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