On top of everything that has happened already in 2020, a very frustrating thing to see is that the price of your car insurance went up. But how could your rates rise when people have been driving less for the most part? Well, unfortunately, rates on auto insurance are rising across the board due to factors that are not necessarily under your control.
And while most major auto insurance companies gave some kind of payment credit at the beginning of the pandemic shut downs in March, that only did so much for drivers. Meanwhile, some people’s premiums have already returned to pre-pandemic levels despite circumstances not changing. So, what has caused your increase in auto insurance costs?
If you noticed your car insurance went up despite your safe driving and credit score you’re probably wondering why. Well, one reason your rates could have risen is due to you insurer’s profit margin, or lack there of. According to Value Penguin, the top 10 insurance companies in the US have increased their premiums by 1.6%. This increase is likely due to increased natural disaster frequency in the US. Hurricanes, Wildfires and more have plagued the US in particular which generates losses for individuals and companies.
Since there seems to be no end in sight to natural disasters, companies will only continue to increase premiums. Unfortunately, you cannot do much to stop these rises in insurance, since you don’t control the weather. The best thing you can do to combat this is by shopping around often. If you shop for quotes every 6-months you will see the most up-to-date rates and might even find some savings.
When it comes to car insurance, you likely do not consider your address as a factor that can make it go up. Yet, the location in which you live plays a role in your premium. If you live in an area that has a higher than average crime rate, you will pay more for insurance. So, if you have recently moved and noticed your premiums rose slightly, that is the likely culprit.
Just like company losses due to natural disasters, you do not hold much control over your area’s crime rate. We do not suggest trying to solve your area’s crime problem or attempt to use a parent or friend’s address either. If you list a false address in order to get a lower rate you could be dropped by your insurer. Then, when you try to take a policy out with your true address, the next company will notice the canceled policy/lapse in insurance and you will pay significantly more.
Lapse In Insurance
One of the first things a car insurance company will look at is your history of coverage. If they notice a gap or lapse in coverage, they will charge you more to insure your vehicle. This is why maintaining coverage despite using your car infrequently is so important.
In other words, even if you do not drive much, maintaining your car insurance benefits you more than it hurts. And if you find yourself driving less and less miles per year, it may be time to consider Per Mile insurance instead.
Understandably, you may have considered or already have canceled your policy due to pandemic closures. Many people have found themselves working from home, without a job, or just staying at home more. However, if and when things return to normal, companies will look at your insurance history to determine what to charge you.
They will absolutely charge you more if you canceled your previous policy and went without insurance even if you occurred no accidents or violations. On top of that, if you do get into an accident or are pulled over, you can face serious fines and out-of-pocket repair costs. Keep your coverage up-to-date now, so that later you are not asking why your car insurance rates went up.
High-Cost Of Repair
Another reason car insurance went up for a lot of folks among all companies is the high-cost of repairing modern vehicles. You’ve likely seen or maybe even bought a car with advanced safety technology, such as early braking or lane changing sensors. That technology is great at keeping us safer on the road according to the Insurance Institute for Highway Safety, yet what happens if you get into an accident?
For example, some cars utilize cameras and lasers on the windshield to detect approaching objects. If your windshield cracks or is damaged, the entire windshield may need to be replaced and re-calibrated. The cost of repair and re-calibration is very high and insurance companies know that fact. So, as a response to increased cost of repairs, insurance companies raised premiums to account for repair costs.
Now, this is not an endorsement against advanced safety features, but you should know they are driving up insurance rates. It is ironic that the features and safety technology that manufacturers put into cars are costing us more than saving us money. However, with such high-tech features comes high cost of repair when compared to older vehicles. So it’s not much of a leap to connect high-cost of repair with rising insurance premiums.
Credit Score Drop
Lastly, and maybe an unsurprising factor in car insurance rates, is your credit score. Yes, your credit score helps determine whether your rate goes up or stays down. At a time like this, many people may see their credit score drop which means their car insurance likely went up.
Of course, it may be difficult to improve your credit if you are having money issues. Especially since two major reasons credit scores drop are late payments and using too much of your available credit line. Luckily though, you have some control over this factor unlike some of the above ones.
So, what can you do to protect your credit score from dropping? CNBC recently highlighted several ways people can protect their score during the pandemic. They recommend prioritizing debt, meaning choosing a higher debt amount such as a mortgage over small credit card payments. Another recommendation for people who have lost their income during the pandemic is to ask for forbearance from creditors/lenders.
Many lenders/creditors are offering temporary forbearance to their customers because they know people cannot make payments. Keeping your credit safe right now means not having to worry if your car insurance went up when it’s time to renew your policy.