You may have noticed that your auto coverage premiums rise annually, even if you’ve been a good driver and haven’t had to file a claim – but why does car insurance increase every year? There can often be several reasons why you might be paying more this year than last, even if you don’t know why.
However, as an insured driver, you may not want to pay more for your premiums each year that passes by; but is there anything you can do about it?
Why does car insurance increase every year?
It’s unlikely that anyone will want to pay more for their vehicle’s coverage if they don’t have to. However, there are often several ways that you could increase the premiums of your auto insurance, such as:
· Adding other drivers to your auto insurance policy
· Committing traffic violations
· Adding another vehicle to your coverage
· Changing or upgrading your current insurance
But what if you haven’t done any of these things? In these instances, it may be a case of a rate increase – which isn’t likely to be your fault.
Why might your insurance increase if nothing’s changed?
If you don’t think you’ve done anything differently, you may want to know why your premiums are higher.
Often, these companies will set your rates based on specific information (like historical data) to determine any possible future losses or claim payments that they may have to make. The more they think they’ll need to pay out, the more they’re likely to charge on your premiums.
Information like your location, age, gender, and much more can all be crucial to an insurance company when determining the risk of insuring you – and in most cases, they’ll use all this information to calculate how much they need to charge you to compensate their potential losses.
It may even be to compensate the insurer for the cash that they need to pay out in claims yearly through rate revisions. If the overall amount they payout is more than their premium revenue, they’re likely to increase the rates for their customers the next year to make up for this.
Wildfire, flooding, hurricanes, and substantial claim loss are just a few of the things that can cause an increase in your insurance rates.
Anything you can do to stop your rates from increasing?
Unfortunately, in most cases, this is how insurance companies work – even if it seems unfair to be charged more for something that’s out of your hands and may not even be directly related to you. Your insurer will often need to make sure that they maintain an ROI (return on investment) and lower their risks to keep on operating and making a profit.
While this increase doesn’t usually benefit you in any way, it can often help your insurance company to keep on running and insuring you.