Auto Insurance Rates: Can They Increase?

Auto insurance companies can and do raise their rates, and there are several reasons why. The most common reasons for rate increases are car accidents and traffic violations, but other factors include changes of address, adding a new vehicle or driver, increases to claims in a specific area, and increases to car repair and replacement costs. Rate increases can also be influenced by factors outside of the policyholder's control, such as widespread insurance fraud, an increase in natural disasters, or a higher number of claims in their area.

Accidents and traffic violations

Insurance companies view drivers with accidents and traffic violations on their records as higher risks, meaning they are more likely to file an insurance claim. As a result, insurers will typically charge them higher rates to offset the potential cost of future claims. The more violations or accidents on your record, the higher your insurance premium is likely to be.

The type and severity of the violation or accident also matter. For example, a single traffic ticket for speeding can raise insurance costs by up to 82%, with the increase varying depending on the state and how much over the speed limit the driver was going. More serious offences, such as driving under the influence (DUI), can result in even higher spikes in insurance rates and may even lead to policy cancellation.

In addition to the type and severity of the violation, other factors that insurance companies may consider when determining rate increases include whether it is the driver's first ticket, how long it has been since their last offence, where the violation occurred, and the driver's age and overall driving history.

While accidents and traffic violations can lead to higher insurance rates, there are steps drivers can take to mitigate the impact. For example, attending a driver safety course or a defensive driving course may help reduce insurance rates. Additionally, maintaining a clean driving record is crucial for keeping insurance costs down.

Changes to address or vehicle

Changing your address or vehicle can impact your auto insurance rates.

Address Changes

Insurers consider the frequency, severity, and cost of claims based on a ZIP code and assign a risk level to your address. If you move to an area with higher crime rates, more traffic, or a different parking situation, your insurance rates will likely increase. For example, if you usually park on the street, you may pay more for auto insurance than if you park in a secured garage or driveway.

Local crime rates, commute times, and the number of uninsured drivers in your area can also influence your premiums. Moving from a rural area to a densely populated city will generally cause your insurance rates to go up.

If you're moving to a different state, you'll need a new auto policy. However, if you're remaining in the same state, your insurance company will update your address and rates based on your new ZIP code.

Vehicle Changes

Adding a new vehicle to your policy can also increase your rates, especially if the new vehicle is more expensive. A more costly car is more likely to be stolen and cost more to repair or replace than your previous vehicle.

Combined Impact of Address and Vehicle Changes

If you're moving to a new address and purchasing a new vehicle, these changes could further increase your insurance rates. The combination of a new address with higher risk factors (such as higher crime rates or denser traffic) and a more expensive vehicle could result in higher premiums.

It's important to note that insurance companies will need to be informed of any address or vehicle changes to update your policy accordingly. Failing to do so could result in policy cancellation, claims denial, or higher rates.

Claims in your area

Auto insurance companies may increase their rates due to factors beyond your control, such as an increase in claims in your area. This could be influenced by a range of factors, including:

• The rate of thefts and vandalism in your area. If there is a high level of crime or vandalism in your neighbourhood, it can drive up the cost of coverage for everyone in the area.
• The likelihood of severe weather events. If you live in an area prone to severe weather, such as flooding or hail, it can contribute to higher insurance rates.
• The number of claims filed by others in your ZIP code. If your area has a high rate of claims, it becomes riskier for insurance companies to cover drivers there, leading to an increase in rates.
• The cost of car repairs. If the cost of repairing vehicles increases, insurance companies may raise their rates to cover the higher costs.
• Environmental events in your state. If there is a severe weather event or natural disaster in your state that results in a high number of vehicle damage claims, insurance companies may raise rates for all drivers in the state to compensate.

Repair and replacement costs

The cost of repairing a car can vary widely, from $100 to $2,000, depending on the type and extent of the damage. For example, fixing an air conditioner can cost anywhere from $100 to $1,500, while transmission replacement can range from $1,500 to over $6,000.

The cost of repairs is influenced by several factors, including the make and model of the vehicle, the severity of the damage, local replacement part prices, and labor costs. Newer car models with advanced technology often require more complex and expensive repair processes. For instance, safety sensors on bumpers can make bumper repairs more complicated and expensive. Additionally, supply chain disruptions can affect the availability and cost of new car parts.

When it comes to insurance coverage, collision coverage will cover repairs to your vehicle if you are at fault in an accident. On the other hand, comprehensive coverage, which is typically included in full-coverage policies, will cover repairs for non-collision events such as natural disasters, fire, vandalism, or theft.

It is worth noting that standard auto insurance policies do not cover mechanical breakdowns or routine maintenance. For this type of coverage, you would need to purchase additional car repair insurance or an extended warranty. Car repair insurance, also known as mechanical breakdown insurance (MBI), is typically available for newer vehicles with low mileage and can provide peace of mind in case of unexpected repairs. This type of coverage usually has a deductible, and the cost of the policy will depend on factors such as the age and mileage of the vehicle, as well as the chosen deductible amount.

Driving record

A person's driving record is one of the most pivotal factors in determining their auto insurance rates. Insurance companies use driving records to assess how much of a risk a person is, and the more risk they carry, the more they will have to pay in premiums.

Insurance companies will look at a person's driving record when they apply for a new policy, get a new quote, or renew their existing policy. They will also check it if a person changes the level of coverage, changes their car, or adds an extra driver to the same coverage.

Most insurance companies will look back at the previous three to five years of a person's driving record, but some will go back further. For example, a DUI will stay on a person's record for up to seven years in most states.

Minor traffic violations, such as speeding tickets, will typically increase a person's insurance premiums by 10 to 15 percent. Multiple minor violations can lead to more points on a person's license, resulting in a higher rate increase.

Major traffic violations, such as driving with a suspended license or hit-and-run, will result in steeper rate hikes. Insurers may even refuse to provide or renew a policy if a person has a major violation on their record.

The best way to prevent an auto insurance rate increase is to maintain a clean driving record. Taking a defensive driving course can also help reduce insurance costs.

Frequently asked questions