Why Do Auto Insurance Premiums Go Up?

Like home insurance rates and many other types of insurance, auto insurance premiums can go up – or down. We seldom complain when premiums go down; premiums rising, however, are more alarming. Changes in your premium shouldn’t be taken personally, but they can reflect changing risk both individually and on a more general level.

Insurance is the transfer of risk from an individual to a pool. While that means you don’t have to buy a new car by yourself if you have an accident – and pay for any damage caused to others – it also means that costs that affect others can affect your premiums as well.

Car repair costs tend to increase

Back in the day, bumpers were made of sturdy steel and were difficult to damage. Today, a minor fender bender could result in a repair cost of thousands of dollars because cars are constructed with passenger and pedestrian safety in mind. Those old cars were cheaper to fix but arguably not as safe to drive.

Accident frequency or severity are increasing

In the insurance business, frequency means just what you think it might mean: how often accidents are happening. An increase in frequency typically means higher rates for everyone over time. Severity refers to the cost of the claims. We tend to think of the repair costs when we think of auto accidents. However, the cost of treating injuries or the expense of lawsuits can sometimes dwarf the cost of repairing or replacing vehicles.

The effect of at-fault accidents

As you might expect, an at-fault accident can affect your premium. Frequency and severity come into play here as well – but on an individual level. If you have more than one accident or your accident was particularly expensive, your premiums might go up more than for a simple fender bender. Conversely, your rates can go down if your accident is ancient history and now the accident is no longer being surcharged.

Traffic tickets or violations can affect your premiums

Insurers have found a correlation between certain types of driving violations and the risk for a loss. It makes sense if you think about it. Speeding is a leading contributor to accidents as are distracted driving and careless driving. Any of these violations can affect your premiums. The good news is that the increased premium doesn’t last forever and if your driving record is clean thereafter, your premiums can go down as the surcharge is removed from your policy.

We can’t control every factor that affects our insurance rates, but some of the larger factors that are related to safe driving are within our control. Some insurers also offer a discount for driver-safety courses or for accident-free driving. Reach out to your broker to find out which discounts are available to you.

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