Why Do Auto Insurance Rates Increase?

Why Do Auto Insurance Rates Increase?

Car insurance rates are determined by many different factors and these are important for you to know when you are ready to compare auto insurance quotes. Comparing quotes without all the information may keep you from getting an accurate auto insurance comparison and possibly paying too much for your car insurance.

Insurance rates are driven by factors that are both in your control and out of your control. The things that are out of your control can cause the insurance rates to increase, which will increase your insurance premium making it not as cheap as it once was.

Every state regulates the insurance companies operating within the state boundaries and the Insurance Commissioner is directly responsible for overseeing the insurance industry.

Insurance companies are given a set rate by the state to charge as a basic starting point. When the insurance companies feel that the cost of doing business in those states are rising to a point where they are no longer able to afford to write insurance policies, they have the option to request a rate increase.

The rate increases must be approved by the states’ legislature before the insurance companies can start charging a new rate.

In states such as Florida where hurricanes and floods have done tremendous damages to vehicles, the cost of comprehensive insurance is much higher than a state that does not have the exposure to claims caused by natural disasters.

Those costs can come all at once and can render an insurance company financially crippled by the sheer amount of claims filed in a short period.

In 2004, the state of Florida had four significant hurricanes within a two-month period, which resulted in the devastation of several smaller mobile home insurance companies.

While the auto insurance companies cannot immediately raise their rates, they can petition for assistance by asking for a rate increase to offset their losses. This increase may take months to years to go into effect, but unless the percentage of increase is exorbitant, the insurance companies will generally succeed in getting rates increased.

These changes in rates can cause your car insurance premium to increase the next time that your insurance premium is due.

This is one of the things that you need to know when you are comparing car insurance.

If your state has raised the rates, when you compare auto insurance quotes, you may think that the other insurance companies are higher than your own. Until you receive your next premium, you may not be aware of any statewide increase.

When you do your auto insurance comparison, you might look at your state’s website to see if there has been any change in insurance rates for the auto insurance industry. Your state should have a separate section for the Insurance Commissioner, which lets you know of changes to the financial and insurance laws in your state.

The more information you are equipped with, the better chance that you will get an accurate quote on your car insurance.

Things that are directly within your control over what insurance rates you pay, include your driving history, your credit history and the type of make and model car you drive.

If you have poor credit, you can work to improve your credit score. If you have a history of tickets or moving violations and accidents, you can take a defensive driving course. If you are driving an unreliable vehicle, or one that is targeted by thieves regularly, you can change vehicles.

While you cannot change the state rates for insurance that you pay, you can do many little things to make sure that you are getting the best deal on your car insurance and paying the lowest rates possible.