You just received your recent auto insurance renewal and BOOM! Your rate went up, but why?
You have an excellent driving record with no tickets or claims, not to mention they raised your rates last year. So why are they doing this to you?
It’s hard to understand I know. You feel like they are intentionally targeting you and you have no idea why. You pay your bill on time and nothing changed since your last renewal so what gives?
I’ve been in your shoes (and I still am) but the problem is no one will give you a straight answer as to what is really going on. You feel like you have been paying all this money for something you don’t even use. Worst of all no one called you or even let you know that your rate was going to go up. Sure they probably sent you a letter but when you get so much junk mail from insurance companies it’s hard to know what to open and what to trash.
Don’t worry, it was nothing you did and you are not alone. Unfortunately everyone is seeing a rise in rates. Certain states are worse than others but it won’t be long until it’s common everywhere. It’s a product of the age we live in and the bad news is it will only get worse as the damage and cost to the insurance industry continues to rise.
I have been in the insurance business for 8 years in Colorado and every year we battle state wide rate revisions that have caused policy costs to go up as much as 30% year over year. The biggest issues driving these costs are:
- Distracted driving is at an all time high, and texting and driving causes more incidents than any other issue on the road today.
- Vehicle repair costs have risen dramatically over the past 10 years, and with all the new technology being added to cars today, this trend will continue into the future.
- Medical costs are also rising at an alarming rate and the legal system has many flaws that allow lawyers to further inflate these payouts, which trickles down to everyone.
- Uninsured and underinsured motorist claims are more frequent than ever costing insurance carriers money that they can never get back.
- With gas prices being low, there are more drivers on the road than ever before, which also means more accidents.
I can’t control any of that so what should I do?
There are many factors Insurance companies use in determining an auto rate but the most common are your age, vehicle, address, insurance history, consumer report(credit) and driving record. Most companies have a secret “formula” which they use, but all of them are based on those major rating matrices. However, not one of them will actually tell you all the things they look at. This essentially gives them free reign to charge what they want as long as they can show the division of insurance that it is “reasonable”.
This is bad news for you but there are some steps you can take to help keep your rates down and make sure you’re paying what you’re supposed to.
- Make sure you review your coverage at each renewal and ask questions of your agent or carrier. They are usually betting you won’t even notice an increase until it’s too late so don’t let them think you are not paying attention.
- Consider your vehicle value and choose a deductible that makes sense. If you have an older vehicle, you may be paying more for insurance coverage than your vehicle is worth. In that case I usually recommend adding uninsured motorist property damage to your policy. This covers the vehicle if you are involved in a hit and run or in an accident with an uninsured/underinsured motorist at a minimal cost.
- Ask about your medical payments coverage, although I don’t always recommend removing it, taking it off your policy can decrease your premium substantially for the 6 months. If you want more information on Medical payments please see my resources menu for a breakdown.
- Consider any of the additional coverage’s you have added like towing, roadside assistance, and rental car reimbursement. Many times you can get these types of coverage through AAA or Costco at a better price and with better service.
- Ask about any discounts your company may have for your occupation, bundling your home or life coverage, and for safe driving and low mileage. You can also ask about classes you can take that may give you a further discounts on your insurance along with better skills on the road.
Every company is different and I can’t say all of these changes will completely make up for increases you have seen, but every little bit helps. If you have a company that does not provide you an agent, be sure you understand insurance enough to make the right choices on your own. If insurance is “Greek to you” it may be worth looking into a company that will give you a personal agent, that way you know someone has your back.
Another thing to consider is insurance companies do look at your prior insurance liability limits. This means if you carry state minimums or just above, it actually costs your more to be insured. What I recommend is paying a little more to increase your limits for 6 months if you can, then at the end of that 6 months, shop your rate to other carriers. This can decrease your costs and help you pay a better rate going forward, if you’re open to switch companies.
I hope some of this helps you make a little more sense of your auto insurance coverage and gives you the information you need to feel confident talking about your policy. The biggest problem out there is that most people don’t even pay attention or have any idea what they are spending their money for.
The more knowledge you have the more you’ll be able to assure you get the right price for the right policy. The insurance companies win if you don’t stay engaged, so schedule just a little time to look things over and make sure you understand it.
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