There are many cautious drivers who are wondering why their auto insurance premiums went up. Although car insurance premiums are based largely on the risk factors of the policyholders, there are many other factors that can lead to premium increases. Some of them are beyond the policyholders’ control.
The most common factors that can lead to premium increases without an obvious reason are the following:
Moving to a new place. Even moving to a different ZIP code just a few miles away can cause the premiums to increase. Moving to an area where the crime rate is higher or to a neighborhood that has a higher population density will likely make the car insurance to be more expensive. The rates will also go up for drivers who move to areas with higher rate claims.
Bad credit score. 95 percent of auto insurers use credit history in their underwriting decisions. A low credit score can affect the insurance rates even more than a DUI. In all states, except California, Massachusetts, and Hawaii, insurance providers are allowed to factor the credit-worthiness when considering premium rates.
People are driving more. More people are driving cars and are driving more miles. There are more cars on the road today, and this means there are more chances for accidents to happen. If there are more accidents, then there are more claims. For this reason, insurers can raise premiums.
Distracted drivers. Distracted driving has become more prevalent with the rise of smartphone use and internal auto technology. The more accidents, the higher the overall costs for car insurance providers. These costs are passed on all drivers, even those who avoid distractions while driving,
An increasing number of uninsured drivers. Dealing with the uninsured claims process can be a massive expense for providers. On average, the cost of an uninsured driver’s claim is approximately $20,000. This cost is passed on to paying policyholders.
Higher speed limits. Some states have increased their speed limits. As a result, there are more fatalities and providers have to pay more liability claims.
Increasing repair costs. Newer vehicles have more gadgets and sophisticated warning devices that cost more to repair. On top of that, newer cars equipped with sophisticated devices are more likely to be stolen by thefts who want to sell these expensive auto parts on the black market.
Rising medical costs. Health care costs are climbing. When insurance providers are required to pay out progressively larger medical costs following at-fault accidents caused by their policyholders, the whole pool of policyholders may have to pay more on their premiums.
Extreme weather. Drivers who live in areas that were affected by extreme weather events such as hurricanes, blizzards, floods, may have their insurance rates affected. To make up for the payment of an increased number of claims, the insurers are forced to raise the premiums.
Insurance fraud. Car insurance companies lose $29 billion per year due to insurance fraud. To remain profitable, they pass this cost to all drivers, including those who don’t lie to their insurers.
Living in a state that has recently legalized recreational marijuana use. In the states that legalized marijuana use, insurers noticed an increase in collision claim frequency.
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“When faced with a rise in their premiums, drivers should not simply accept them. There are a few things they can do to keep the insurance costs under control, like increasing the deductible, or opting for liability instead of full coverage.”, said Russell Rabichev, Marketing Director of Internet Marketing Company.