You thought you had a good driving record, but when your latest car insurance renewal showed up in your mailbox, you were shocked to find out that your car insurance rates unexpectedly increased.
So why did your car insurance rates increase?
There are a few reasons why car insurance rates increase, even for good drivers.
Did You Have an Accident or Receive a Ticket?
If you had an accident or ticket over the past year, you could be seen as a higher risk to your insurance company. If you haven’t been in an accident and didn’t receive any tickets, it could be possible that there is erroneous information on your driving history. It’s a good idea to check your driving record if your rates have been incorrectly raised for an accident or ticket.
Rise in Claims
More people are taking to the roads thanks to lower gas prices and increased job growth. With more vehicles on the roads, the likelihood of accidents increases. According to the Insurance Research Council, the average payout for a bodily injury claim for an accident rose by 32 percent between 2005-2013. Insurance companies then recoup their losses through higher premiums for all customers.
Increased Accidents from Distracted Driving
The number of accidents caused by distracted driving, including texting while driving in the United States continues to increase at an alarming rate. Increased accidents mean insurers are paying more to cover claims. We’re all paying the price, as costs are spread across all insured drivers.
Insurance Fraud is Growing
According to the Insurance Information Institute, almost $32 million is lost each year because of insurance fraud. Half of that amount can be attributed to high-risk drivers falsifying information on their insurance applications to gain better rates that are given to drivers with clean driving records. Most of the remainder is paid out for claims for faked injuries in a car accident. The cost of insurance fraud makes rates go up for everyone, including good drivers.
Your Credit Took a Hit
Many insurers consider your credit history when calculating your car insurance rates. In most states, a “poor” or even “good” credit history instead of excellent credit could cause your insurance rates to rise, even if you have a perfectly clean driving history. If your credit took a nosedive over the past year, that could cause your car insurance rates to increase.
Victim of Price Optimization
Another little-known reason why car insurance rates go up for apparently no reason at all is what is known as price optimization. A recent report by Consumer Reports shows that over 50 percent of consumers stay with their car insurer for about 15 years. Insurers sometimes give loyalty discounts, but they also have calculated how much they can get away with increasing rates for loyal customers.
To prevent this from happening to you, it’s always a good idea to shop around to compare your current rate to other insurer’s rates.
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