You paid on time. You had no accidents and no tickets. Then the renewal notice arrived, and your premium was higher anyway. It feels unfair, and many drivers assume it must be a mistake. Sometimes it is, but more often the reasons are both ordinary and out of your control.
Reasons that have nothing to do with you
Insurance prices follow costs, and costs have risen sharply in recent years. Insurers pay for repairs, medical care and replacement vehicles, and all three have become more expensive.
- Repair costs. Modern cars are full of sensors, cameras and computers. A bumper that once cost little to replace may now need recalibrated electronics.
- Parts and labor. Supply issues and a shortage of skilled technicians have pushed up what shops charge.
- Vehicle values. When used car prices rise, totaled vehicles cost more to replace, and insurers pay that difference.
- Medical costs. Injury claims are more expensive as healthcare costs climb.
- Weather and disasters. Storms, hail, flooding and wildfires lead to large claim payouts in some regions, and that can raise rates for everyone in the area.
- Theft and litigation trends. Rises in car theft in some cities and larger legal settlements can also push prices up.
In many states insurers must file rate changes with regulators, and the approved increases then apply across a group of customers. That means your premium can rise even if you personally did everything right.
Reasons that are about you
Other changes are tied to your own situation, and they are easy to miss.
- A birthday or a new driver in the household. Adding a teen to a policy is one of the largest single increases most families see.
- A move. Rates are based partly on your ZIP code, so moving to an area with more claims can raise the price, while a quieter area can lower it.
- A change in mileage or use. A longer commute or starting to use the car for work can raise the price.
- A new or different vehicle. Different models have different repair, theft and claim histories.
- Your credit-based insurance score. In most states, insurers use a score drawn from your credit history. A change in your credit can move your price, though a few states restrict or ban the practice.
- Lost discounts. A discount for a bundle, a good student or a safe-driving program may have expired or been removed.
- A gap in coverage. A lapse, even a brief one, can lead to a higher price when you start again.
- A claim, even if it was not your fault, or a claim by someone else on your policy.
The slow creep at renewal
Some drivers also notice that their price rises a little each year with the same company, while new customers get better deals. Insurers have been criticised for this over the years, and some states have introduced rules that limit pricing practices based on how likely you are to switch. Regulations differ, so it is hard to say how much applies to you. Either way, the lesson is the same. Staying with one company without checking the market can cost you.
A quick example
Imagine a driver whose premium rose by about 12% at renewal. Nothing about her record changed. Part of the increase came from a rate filing in her state, driven by higher repair costs. Part came from the fact that she had moved two ZIP codes over, to a neighborhood with more theft claims. And part came from the loss of a multi-policy discount after she cancelled her renters insurance. She could not control the first, but she could fix the third and shop around for the rest. Often the cause is a mix of reasons, which is why it helps to look at each one.
How to find out why
- Compare your new declarations page with your old one. Check the vehicles, drivers, mileage, coverage and discounts.
- Call your insurer and ask for a clear explanation. A good question is: what changed between my last term and this one?
- Look for errors, such as a driver who no longer lives with you, a wrong mileage estimate or a violation that should have dropped off your record.
- Ask what discounts you might be missing. Our guide to auto insurance discounts lists common ones.
What you can do about it
You cannot change repair costs, but you can change what you pay.
- Shop around. Insurers weigh the same facts differently, so a higher rate with one company may be much lower elsewhere. Our guide on how to compare car insurance quotes makes it simple.
- Review your coverage and deductible. Our article on choosing a deductible shows how to balance the cost and the risk.
- Try a telematics program if you are a careful driver and drive less than most.
- Pay in full or use automatic payments if the company gives a discount for it.
- Work on your credit if you live in a state where it affects your price.
A higher premium is annoying, but it is also a prompt to check the market. Many drivers find a better price within minutes. When you are ready, compare quotes and see where you stand.
Enter your ZIP code to see options that fit your budget. It is free and only takes a few minutes.
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This article is for general information only and is not insurance, legal or financial advice. Coverage, rules and prices vary by insurer and state.