Insurance Costs: Why Your Vehicle Premiums Rise

There are many factors that can cause vehicle insurance rates to increase. Some of these factors are within the driver's control, such as their driving record, age, gender, and choice of vehicle. For example, younger drivers tend to pay more for insurance due to their lack of driving experience, and certain vehicles are more prone to theft or accidents, which increases the cost of insurance.

Other factors are outside of the driver's control, such as inflation, supply shortages, and increases in repair and replacement costs. Additionally, insurance companies may raise rates due to increased claims or expenses in a particular area or changes in the industry.

It's important to note that insurance premiums are not raised on a whim, and any increase in rates is typically tied to an increased risk for the insurance company.

Claims and traffic violations

The impact of traffic violations on insurance rates varies across states and insurance companies. For instance, a speeding ticket in Pennsylvania may lead to a 13% increase in insurance rates, whereas the same offence in North Carolina could result in a 48% increase. Additionally, some insurers may not increase rates for minor violations, while others might.

When it comes to age, older drivers tend to be penalised more for violations than younger drivers. For example, a 74-year-old driver's insurance premium may increase by 1.81 times after a reckless driving violation, while an 18-year-old's premium may only rise by 34 cents per dollar.

Not all traffic violations affect insurance rates equally. Non-moving violations, such as parking tickets or broken tail lights, typically do not impact insurance rates unless left unaddressed for an extended period. On the other hand, moving violations, like speeding or running a red light, are considered risk factors by insurance companies and can lead to higher premiums.

The number of claims and the type of claim filed can also influence insurance rates. Comprehensive claims, which cover incidents like car theft, vandalism, or weather-related damage, may result in a smaller increase in insurance rates compared to collision claims. The size of the claim also matters, with larger claims leading to higher premiums.

It's important to note that insurance companies use your driving record and claims history to assess your risk as a driver. A history of multiple claims or traffic violations indicates a higher risk of future claims, which can lead to substantial increases in insurance rates.

Vehicle changes

Age, Make, and Model of the Vehicle

The age, make, and model of a vehicle are crucial factors in determining insurance rates. Older vehicles are generally cheaper to insure than newer ones, as their value has depreciated over time. Additionally, certain vehicles are more prone to theft, involved in more accidents, or costlier to repair, resulting in higher insurance premiums. On the other hand, vehicles with better safety ratings or additional security features may qualify for lower premiums or even discounts.

Vehicle Modifications

Modifications to a vehicle can also lead to changes in insurance rates. Any changes that deviate from the manufacturer's original factory specifications are considered modifications by insurers. This includes engine modifications, such as adding a supercharger to increase speed and power, which is seen as a higher risk by insurance providers. Other modifications, like changing the wheels, brakes, suspension systems, or car interiors, should be performed by skilled mechanics and reported to the insurer, as they can significantly impact the vehicle's performance and safety.

Vehicle Wrap and Tinting

Applying a vehicle wrap to change the car's colour can increase the overall value of the vehicle, leading to higher insurance premiums. Wrapped vehicles may also be more attractive to thieves or vandals. Tinting windows can impact the safety of the vehicle, especially if the driver-side window tint is too dark, obstructing eye contact with outside road users. Tinted windows can also hinder rescue operations in the event of a collision, as they cannot be broken effectively with a window punch.

Roof Racks

The addition of a roof rack is another functional modification that can affect insurance rates. Roof racks alter the vehicle's value and aerodynamics, especially when carrying items like bicycles or kayaks. Failing to disclose this modification to your insurance provider may result in denied claims or policy cancellation.

Vehicle Replacement

Newer vehicles tend to have higher insurance rates due to their increased value and the potential need for costly repairs. Insurance companies often offer new car replacement coverage, which guarantees a brand-new car in the event of a total loss, without considering depreciation. This type of coverage adds to the overall cost of the insurance policy.

In summary, vehicle changes, whether they are modifications, replacements, or additions, can have a significant impact on insurance rates. It is essential to inform your insurance provider of any changes to your vehicle to avoid unexpected increases in premiums or issues with claims.

Driver changes

Adding a new driver to your insurance policy is a common reason for an increase in your insurance rate. This is because insurance companies calculate premiums based on the overall probability that a vehicle will be involved in an accident leading to an insurance claim. Generally, you should include licensed drivers who live in your household or regularly drive your vehicle on your car insurance policy.

There are several scenarios in which you may need to add a driver to your insurance policy:

• A partner who moves in.
• Teenage children who obtain their driver's licenses.
• College-aged children who drive your vehicle when they return home for the holidays.
• A roommate or housemate.
• A friend or family member who lives outside your home but borrows your car regularly.

The cost of adding a driver to your insurance policy varies based on their driving history, type of vehicle, and other details. Adding an inexperienced or high-risk driver, such as a teen driver or someone with a poor driving history, will likely increase your premium. On the other hand, adding a more experienced driver with a clean driving record may lower your premium.

It's important to note that failing to add a driver who lives with you and has access to your vehicle can have severe consequences. If an unlisted driver crashes your vehicle, your insurer may refuse to pay for the damages or even cancel your policy. Therefore, it's always best to consult your insurance provider to determine the appropriate course of action.

Coverage changes

For example, adding coverage for a new car or additional liability protection will increase the cost. Similarly, if a driver wants to add a new driver to their policy, such as a teenage driver, their insurance costs may increase significantly.

It is important to note that making changes to vehicle insurance coverage does not always result in higher premiums. In some cases, drivers may be able to reduce their coverage, change their deductible, or switch insurance carriers to find more affordable options.

Additionally, drivers cannot add coverage after an incident and expect the insurance company to cover the loss. For instance, if a driver's windshield is damaged, they cannot add glass coverage afterward and have the insurance company pay for the repair.

Overall, while coverage changes can impact insurance rates, it is important to remember that insurance companies consider various factors when determining premiums, including driving history, age, and location.

Inflation and repair costs

The cost of repairing newer vehicles is particularly high. A simple fender bender can now damage cameras, proximity sensors, and other technologies used for safety features and tools such as cruise control, parking, and emergency braking. According to a report by industry analysts CCC, the average estimate for a front-end claim in 2022 was $3,706, up more than 15% from the previous year. Vehicles that are more than seven years old, on the other hand, are over $1,000 less to repair.

The increase in repair costs is also due to a shortage of mechanics, which means it takes longer to fix vehicles, raising rental car costs for insurance companies. Additionally, climate change is playing a role, with more vehicles damaged by extreme weather, leading to more claims and higher premiums.

Frequently asked questions