Tag Archives: Car Insurance Premiums

Why Your Insurance Premiums May Increase Even Though You Didn’t File a Claim

When your car insurance premium comes up for renewal each year, you may see something unexpected: the premium has increased by a significant amount.  This can be very shocking if you have not filed a claim, had an accident, or even gotten a speeding ticket.  There are a number of other factors that can affect your premium, and you have no control over any of them.  However, there are a few things you can do if you find your rate has become higher than you’d like.

Financial Data

Causes of Insurance Premium Increases

  • Natural disasters.  Things like hurricanes, major tornadoes, and severe ice storms all cost insurance companies money.  In fact, a single tornado can cost an insurance company several million dollars or more.  That leads to a price increase just to cover their expenses – in most cases they are still not making a profit.  These disasters affect all areas of insurance.  While they most often pay out on car and home policies, motorcycles, boats, all-terrain vehicles, and even life insurance policies may have to be paid out during the worst storms.
  • Interest rates are lower.  What does that have to do with your premium?  Well, when an insurance company collects your premium, they do not simply put it in an account or use it to pay their bills.  Instead, they invest a portion of it in bonds and stocks.  Lately, the interest rates on bonds have been shrinking, and while the stock market is recovering from the late-2000s slump, it is still not as strong as it once was.  This means insurance companies are not making as much interest, which in turn means they do not have any extra income to subsidize their payouts.  They often count on this money to cover all of their costs, and since they haven’t been getting it, they have either to increase rates or operate at a loss.

Your Options

If your premium increase is not a result of something you have done, you have a few different options.  First, you can increase your deductible.  This means you’ll have to pay out more if you have an accident, but if you are a good driver, this should not be a concern.  Of course, if you have already set your deductible at its highest, you may not have this option.  You could also change the amount of coverage you have.  However, this isn’t an option if you are still paying on your car since the loan company will require full coverage.

Do you qualify for any discounts you are not getting?  Check with your insurance company to make sure something hasn’t been overlooked.  For example, you have joined an organization like AAA recently, that discount may not be reflected on your policy.

Your best option, though, may be to start looking for new car insurance.  It can be a hassle to change insurance companies, but if you save a significant amount, it is certainly worth the work.  Do some comparison-shopping and see what other insurance companies can offer you.  You may find that you can get the same amount of coverage for less elsewhere.

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A Guide to Car Insurance Deductibles

A car insurance deductible is one of those things most of us have written into our policies, but few of us rarely think about. Yet deductibles are an important part of your insurance decision when it comes time to renew an existing policy or purchase a new one. The amount of your deductible has a direct effect on your premiums.

In case you’re wondering, deductibles apply to other types of insurance as well, including health and homeowners insurance. The principal works the same regardless of the type of insurance policy you are talking about.

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Definition of Deductible

As much as you and I want cheap car insurance, insurance companies want customers willing to think long and hard before filing a claim. They do not want customers making claims for every little scratch and dent because it just becomes too expensive. They also do not want customers committing insurance fraud. For both of these reasons, deductibles are widely used.

A deductible is a certain amount of money you agree to pay, out of your own pocket, in the event of an accident or liability claim. If you have an accident that causes $2,000 damage to your car for example, the insurance company pays you $1,500; you pay the remaining $500 yourself.

The deductible forces you to put some “skin in the game.” It also encourages you to be more careful and avoid frivolous claims. The good part about it is that you can adjust your deductibles up or down to meet your budget.

Deductibles and Premiums

The amount of your deductible affects how much you pay in annual premiums. If you choose a higher deductible, you get a lower rate in return. It’s all a matter of assumed risk. The more risk you are willing to take, the less risk your insurance company has to take. That results in lower rates.

Be advised that insurance companies have set minimums for deductibles. Using the $500 amount as an example again, let’s assume that’s the minimum deductible allowed by your insurance for collision and comprehensive. You can raise that deductible to $1,000 or $2,000, but you’ll never be able to go lower than $500.

As for how much money you can save by choosing a higher deductible, that’s entirely up to how your insurance company calculates premiums. You can always get in touch with the representative and ask. However, even if it’s just $100 a year, that could add up to several thousand dollars over a lifetime of driving.

Beyond the Deductibles

It’s true that deductibles play a role in determining how much you pay for car insurance. Nevertheless, if you want the cheapest car insurance possible, keeping your rates low goes well beyond just accepting a higher deductible. It involves understanding how your rates are determined and taking advantage of the opportunities you have to keep them down.

One of the most important things you can do is maintain a clean driving record. That means you drive safely and obey the law whenever you are behind the wheel. Remember that every accident and violation on your record adds to the total amount you are going to pay. And while it’s true time erases blemishes from your record, they’re not erased immediately. Some things can remain on your record for as long as seven years.

The other important thing you can do is shop around. Whenever you are renewing the policy or buying a new one be sure to get quotes from at least five or six companies. Only when you compare those quotes will you be able to find the most affordable car insurance.