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.

Additional Reading: