What Makes Auto Insurance Rates Rise?
Have you ever opened your auto insurance bill only to discover that your rates have risen even though you have a clean driving record? Insurance can be a tricky business, and unfortunately, it’s not just car accidents that raise your rates. Here are a few things you might not have known about that can bump up your monthly payments.
Adding Young Drivers
If you add teenage drivers to your insurance policy, your rates are going to go up. Young drivers are considered at-risk; they are (according to some statistics) three times more likely to get into accidents than adult drivers. Fortunately, there are also ways to decrease these higher rates. Many auto insurance companies in Edmonton, for example, claim that high school and college students who get good grades are less likely to get into an accident. Most insurance companies give “good student” discounts for this very reason. It makes sense: teenagers with a brand new license only have a few months or possibly years behind the wheel, compared to adults who have been driving for decades.
Also be aware that young male drivers will be more expensive—young men are statistically more likely to get into an accident than young women.
While it’s not true that all insurance rates jump as soon as you hit a certain age, some insurance companies start to bump up your premium as you age. Some will raise it as young as 50 years old, though that doesn’t seem fair; statistically speaking, the safest drivers are between the ages of 64 and 69. They have a lot of experience, but they haven’t yet started vying with teenagers for the “most dangerous driver on the road” award.
Once you hit age 70, however, be prepared for your insurance rates to start climbing. You might drive less (which can get you a discount), but slower reflexes and physical deterioration combine to make insurance companies nervous. They’ll bump up your premium to cover anticipated accidents and medical bills.
Buying a New Car
If the “new” car you’re buying is actually an older, used car, your insurance rates will probably stay the same. If you’re upgrading to a newer model, however, you’ll likely have to pay more insurance to protect the more expensive car.
This is true especially if you’re going from the car you bought with cash your freshman year of college that doesn’t have AC or the left side mirror to a brand new sports car financed with a loan. Chances are you only had liability insurance on the older car, but having a loan requires having comprehensive and collision insurance, and the monetary difference between the two policies can be substantial. New cars also cost more to repair and replace than older cars, so insurance companies want to cover their bases.
Having a Low Credit Rating
Having a low credit score can negatively influence your car insurance. Insurance companies want to know that you’re going to be able to pay them on time, and if you have a bad credit rating they’ll charge you more to combat your decreased reliability. Not all insurance companies will do this, however—if you’re concerned, look for a provider who won’t look at your credit score.
Driving More Miles
If you’ve changed jobs recently and your new job is located in the next city over instead of just around the block, be prepared for a new figure on your next insurance bill. A longer commute may cost you more in insurance; the more you drive, the more at risk you are for getting in an accident or racking up the traffic violations. Insurance companies will want to protect themselves against the greater likelihood that you’re going to make a claim.
The reverse is also true—if you shorten your commute, your insurance rates might suddenly go down.
These are just a few of the reasons that your insurance bill might suddenly rise unexpectedly. Getting in an accident is still the most reliable method of increasing your insurance premiums, but it is by no means the only way. If you want to avoid raising your insurance rates, try finding the Fountain of Youth, never let your teenagers take Drivers Ed, or walk the 40 miles to work every morning.
Otherwise, be prepared for your insurance bill. It might not seem fair, but auto insurance is one of those necessary evils…and it always (eventually) benefits us in the long run.
Written on Friday, January 17, 2014 by