In the vast landscape of financial planning, few decisions hold as much significance as securing the right insurance coverage. Alexis Goines, a seasoned professional, stands out as an expert in insurance planning and can help with all your questions.
Question: My auto insurance rates keep going up. Why is it so expensive?
Answer: We understand that it can be frustrating to see your auto insurance rates keep increasing.
In our current climate, the industry is facing unprecedented inflation costs on material and labor, combined with upticks in natural disasters and vehicle accidents. These factors will have a direct impact on your rates, driving higher costs because of the higher financial burden, more funds must be held in reserve ensuring claims can be paid, if/when something happens to you.
Here are some additional reasons your rates may be rising. It’s important to be aware and understand not only your policy, but also how your behaviors and trends can negatively impact your premiums.
1. Claims and driving history: If you’ve made several claims on either your home or auto insurance, your insurer might consider you to be a high-risk client, which can result in increased premiums.
2. Location: If you live in an area that’s prone to natural disasters, high crime rates or heavy traffic, your rates could be higher due to the increased risk of property damage or car accidents.
3. Age of home or vehicle: Older homes and cars are often more expensive to insure because they may have more issues and are more expensive to repair or replace.
4. Credit score: Many insurers use credit-based insurance scores to help determine rates. If your credit score has gone down, your insurance rates may go up.
5. Changes in market conditions: Factors such as inflation, higher repair costs, and an increase in the number and size of claims throughout the industry can cause insurance rates to rise.
6. Policy adjustments: Insurers periodically review their rates and may adjust them based on new data, changes in the risk they are insuring, or regulatory requirements.
7. Frequent changes and low policy limits: Switching insurance companies too frequently may potentially have a negative impact on your insurance rates. Insurance companies consider various factors when determining your rates, including your claims history, credit history, and length of time with your current insurer. If you frequently switch insurance companies and/or carry minimal coverage, it may be seen as a red flag and could indicate a higher risk.
It’s important not to take the decisions lightly, as you may lose certain benefits or discounts that you had accumulated with your previous insurer. For example, some insurance companies offer loyalty discounts or lower rates for long-term customers. By switching frequently, you may miss out on these benefits and end up paying higher premiums.
Additionally, insurance companies may view frequent switches as a lack of stability or commitment, which could be seen as a higher risk. This coupled with low coverage limits and minimal coverage can be a large factor in negatively impact rates. Insurers may assume that you are more likely to make claims or engage in risky behavior if you are constantly seeking new insurance options.
However, it’s important to note that the impact of switching insurance companies on your rates can vary. It can be wise to shop every few years, after having maintained a stable history without gaps in coverage. A stable insurance history with a single reputable insurance company may help you build a positive track record and potentially lead to better rates in the long run.
With this being said, there are many ways you can mitigate increases in your insurance premiums simply with your behaviors: understanding your policy, not filing unnecessary claims and proving a responsible driving history.
It can also be wise to consult with your local agent prior to making these decisions. They can help guide you. Many times, coverage is lost in the transition. They can help talk you through options to lower costs while educating you on all of the potential risks. You may want to consider increasing your deductible, bundling your home and auto insurance with the same company, maintaining a good credit score, installing safety features in your home/car, or taking a defensive driving course.
Taking the time to discuss these options with your insurance agent is always beneficial. My team and I are always here to discuss these topics and offer solutions to help best fit your situation. Having a trusted professional can make all the difference when you have a claims situation!