Insurance Premiums: Monthly Changes Explained

There are many reasons why your insurance changes every month. Firstly, insurance rates are influenced by individual risk factors, such as driving records, credit scores, age, and location. For example, premiums tend to be higher for younger or older drivers, those with poor driving records, or individuals living in areas with higher crime rates or accident rates. Additionally, insurance companies need to collect enough premiums to cover claims and expenses, so they increase premiums to match rising costs in repairs, medical expenses, and inflation. Premiums can also fluctuate due to life changes, such as moving, marital status shifts, or adding a teenage driver to a policy.

Changes in location

Location-Specific Factors Affecting Insurance Rates

Insurance companies assess the risk of insuring your vehicle by considering location-specific factors, including:

• Crime rates: Areas with higher crime rates, such as vehicle theft and vandalism, tend to have higher insurance rates.
• Weather patterns: Severe weather conditions in certain areas can increase the likelihood of weather-related damage claims.
• Cost of medical bills and car repairs: Insurance rates may be higher in areas where medical and car repair costs are generally more expensive.
• Tort vs. no-fault laws: States with a higher frequency of lawsuits due to tort laws may result in increased insurance rates.
• Population density: Densely populated areas often have higher insurance rates due to the increased number of cars and busier highways, leading to a greater chance of accidents.
• Traffic: Areas with heavier traffic congestion may have higher insurance rates as the chances of collisions are higher.
• Commuting distance: If your new address shortens your daily commute, your insurance rate may decrease. Conversely, a longer commute may result in a rate increase.
• Claims history: Insurance rates can be influenced by the claims history of a particular area, including the number of thefts, break-ins, and accidents.
• Parking location: Where you park your car can affect your insurance rates. Parking on the street may be more expensive than parking in a secured garage or driveway.

State-Specific Factors Affecting Insurance Rates

In addition to location-specific factors within a state, moving to a different state can also impact your insurance rates due to variations in state requirements and regulations:

• State minimum requirements: Each state has its own minimum requirements for property damage, liability, and bodily injury liability limits. Moving to a state with higher minimum requirements will likely result in higher insurance rates.
• Uninsured motorist coverage: Some states mandate uninsured motorist coverage, which can affect your insurance rates.
• Personal injury protection: Certain states require personal injury protection (PIP) coverage, which can increase your insurance costs.
• No-fault states: If you move to a no-fault state, your insurance rules and rates may change. There are currently twelve no-fault states in the US.

Changes in marital status

Getting married can have a significant effect on your insurance. While it may not seem like the most romantic activity for newlyweds, calling insurance companies could free up some cash to fund your honeymoon. Both home and auto insurance providers may offer lower rates to married couples. This is because statistics show that married people behave more cautiously and file fewer claims.

The impact of marriage on insurance rates is most significant for very young people. A young person in their early twenties could pay up to 26% less on car insurance premiums once they get married. However, the difference decreases with age, so a 30-year-old might only get a 2% decrease in their rates. This favourable treatment is automatically applied whenever you get an auto insurance quote as a couple.

Home insurance providers may also offer discounts to married couples. They might use marital status as a factor in determining your rate, or they might just offer a flat discount, for example, 5% off when you get married.

Marriage also has an impact on health insurance. It is one of the qualifying life events that allow you to change your insurance plan or add your spouse to your plan outside of the open enrolment period. Most health insurance plans require you to make these changes within 60 days of getting married.

In addition, being married tends to lead to more things needing to be insured, such as vehicles. Bundling your and your spouse's vehicles together with your home insurance could lead to even more discounts on your premiums.

Changes in employment status

Understanding Group Benefits:

If you have group benefits through your employer, it's crucial to familiarise yourself with the details of your benefits plan. Group benefits can include various types of coverage, such as health, dental, life, and disability insurance. However, it's important to remember that every plan is different, and the specific benefits offered can vary. When your employment status changes, you may retain some benefits, but it's essential to identify any gaps in coverage to ensure you're not left vulnerable.

Impact of Job Loss:

Losing your job can have immediate implications for your insurance coverage. If you were enrolled in employer-provided insurance plans, such as group health or life insurance, these benefits typically terminate when your employment ends. Government programs can help replace lost income, but they usually don't provide the same level of insurance coverage. It's important to speak with an insurance advisor to explore alternative coverage options and ensure you remain protected during this transition.

Special Enrollment Periods:

Portability and Conversion Options:

If you're leaving a job, you may have the option to take your existing insurance policy with you, depending on the insurer and the type of policy. Inquire with your HR department about the portability of your group life insurance policy. If portability is not an option, you may be able to convert your group policy into an individual whole life policy, although this may come with higher rates.

Auto Insurance Considerations:

While auto insurance companies may check your employment status, they cannot deny you coverage solely based on unemployment. However, your job can impact your auto insurance rates. Factors such as mileage (whether you use your vehicle for commuting) and occupation can influence your rates. Be sure to provide accurate information to your auto insurance company during employment transitions, as this can impact your rates and coverage options.

In summary, changes in employment status can have significant implications for your insurance coverage. It's important to stay informed about your benefits, understand the impact of job transitions, and take proactive steps to ensure you and your family remain protected during these life changes.

Adding a new driver

You should add any licensed driver who lives in your household and has access to your vehicle to your insurance policy. This includes spouses, roommates, and teenage children. You should also add college-aged children who drive your vehicle when they return home for the holidays.

There is usually no charge for adding a driver to your insurance policy. However, your premiums may change. Your premiums may become more expensive if you add an inexperienced driver or one with a poor driving history to your policy, as they are high-risk motorists. But they may also become more affordable if you include a more experienced driver who's never had a car accident on your coverage, as they are a low risk to the insurer.

If you have a permitted driver using your car, you will have an increased chance of your insurance premium increasing since new drivers are more likely to get into an accident. If a permitted driver gets into an accident in your vehicle, you will be surcharged and your insurance will increase. Once the driver gets their license, the surcharge transfers over to them.

If your child has just obtained their driver's license, you have 60 days by law to inform your insurance carrier. In most cases, your insurance premium will increase, sometimes significantly (up to 60% for a two-car family).

There are four different ownership scenarios that will affect the cost of car insurance for your newly licensed driver:

• Your child will use your existing car (or someone else's car) on an occasional basis.
• Your child will use your existing car, and they will be listed as the principal driver.
• You purchase an additional car for your child to use, and they will be listed as the principal driver.
• You have your child buy a car in their name and require them to purchase car insurance in their name.

After your child initially gets their license, the insurance cost should reduce each year. After six years, the driver is no longer considered a new driver, so their experience will not affect your premium.

In most cases, even though the teen driver will raise your insurance premium, it will still be more affordable than if they obtained a policy for themselves alone. However, this may not always be the case. Many insurance companies offer new policy discounts that can actually make it a cheaper alternative.

For a more accurate idea of how the new driver will affect your insurance, reach out to your insurance agent.

Inflation

Secondly, inflation can increase the value of insured items, such as homes and vehicles, requiring larger policies to cover potential claims. For instance, home insurance rates have risen due to increasing home values, with some areas seeing rates increase by over 40% in the past five years.

Thirdly, inflation can make reinsurance policies, which insurance companies buy to protect themselves from losses, more expensive. This, in turn, can lead to higher insurance rates for consumers.

In addition to inflation, other factors that can affect insurance rates include individual risk factors, such as driving record, age, credit score, location, and the number of insured vehicles or drivers. Life changes, such as marriage, relocation, or a change in employment status, can also impact insurance rates.

Frequently asked questions