Why Auto Insurance Companies Raise Rates

You get your latest auto insurance bill and for some reason your premium has increased. You haven’t received a ticket, let your coverage lapse, or filed a claim and you have a perfect driving record, so why is the insurance company charging you more instead of less? Unfortunately determining auto insurance premium isn’t a scientific formula, and different insurance companies use different methods to determine your auto insurance rates. There are some factors that can influence your car insurance rates that you really don’t have much control over. Here are a few things that can cause your auto insurance premium to fluctuate.

1) Natural Disasters: If there is a natural disaster such as an earthquake or a hurricane in your area, your car insurance company will likely receive countless claims costing them lots of money. This could cause them to raise your rates to compensate for these expenses.

2) Job Changes: If you change jobs, you could be driving longer distances which could increase your chances of getting in to an accident. This is an excuse for auto insurance companies to charge you higher rates because you are a “higher risk”.

3) Teenage Drivers: If your teen is about to get their driver’s license, and you are adding them to your auto insurance policy, expect your rates to go up. Teen drivers are much more likely to get in to accidents, thus labeling them as a higher risk and causing your auto insurance rates to go up.

4) Your Zip Code: You might not believe it but your zip code can have a huge impact on your auto insurance premium. If you live in an area with a higher crime rate or higher accident rate, your rates could increase. This is something drivers frequently see when they move to a new location.

5) Cost of Doing Business: If your car insurance company has increased business costs (rent, high number of claims, more employees, etc.) they will typically pass those expenses on to you in the form of a higher premium.

As you can see, there are lots of different reasons why your auto insurance rate might go up when it seems like there is no good reason. If you are unhappy with your current car insurance provider, it never hurts to compare quotes from a few other companies in your area. You might find a cheaper rate somewhere else.