Auto Insurance Premiums Explained

Factors that make premiums go up or down

You’re getting ready to pay your auto insurance bill when you notice that your monthly premium has changed. But you haven’t filed a claim or added or removed a driver from your policy—events you know are likely to raise or lower your payments. So what happened? It may be something you haven’t even considered. Many factors come into play when your auto insurance premiums are calculated.

Here are a few that might cause your premium to go up:

You bought a new car. Newer vehicles are typically more expensive to insure due to their higher value and increased repair costs. Also, if you’re financing a new car, you’ll likely be required to purchase collision and comprehensive coverage (which you may or may not have previously had with an older car).

Auto repair costs have increased. To achieve greater fuel economy, more automakers are now building cars with lightweight materials such as aluminum, which can be more expensive to fix than steel. This drives up repair costs, which get passed along to insurance companies. If costs go up enough, insurers may be forced to increase their premiums accordingly.

Here are a few factors that might cause your premium to go down:

You bundled your homeowners insurance with your auto policy. Almost every insurer offers a multipolicy discount, so buying home or rental insurance from your auto insurance provider is one of the surest ways to reduce your premium. The same goes if you put all of your cars on the same policy; discounts for multiple vehicles can make a nice dent in your payment.

Your teenage driver had a good report card or just left for college. If your child is getting good grades or not planning to drive while away at school, you might get a break on your premium.  

And here are a few factors that could cause your premium to go up or down:

Insurance premiums for your particular area may be rising or falling. In many states, insurers consider the zip code where your car is garaged when determining your premium. If claims in your region have gone up significantly, your insurer might adjust the premium for everyone in your neighborhood, regardless of claim history.

You’re driving less, or more. Maybe you recently moved closer to your kids’ school and activities, and you’re spending less time behind the wheel. Or maybe a new job requires a longer commute. As a result, your premium will change because, beyond your driving record, annual mileage is one of the biggest predictors when it comes to claims. The fewer miles you drive, the less likely it is that you’ll be involved in an accident. 

You’ve had your driver’s license for a certain number of years. Auto insurance premiums for inexperienced drivers are generally higher, because the rookies on the road make more claims than veteran drivers do. Accordingly, as you amass driving experience, your rates generally go down. But at a certain point—usually after about five decades behind the wheel—driver claims start to increase again, and premiums go up in turn. 

Photo (top): Lori Anderson

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Some information contained in this article is time-sensitive. Prices, event particulars, contact information, and other details are subject to change without notice.