The hardest thing about insurance is getting a bill that is bigger than you expected. This is especially true when you have no accidents or tickets on your record and have been loyal to your insurance company. What is going on and why are you having to pay higher premiums? Well, sometimes insurance sucks… until you need it.
When we dive into what generates the rates you pay, your actions as a driver are only part of the equation that determines how much your premium is. Did you know that your credit history and even your zip code play a role in insurance rates?
Here are some other points to consider when you find your self asking, “Why did my premium go up?”
- The number of new vehicles on the road has gone up. Newer vehicles have complex computer systems, multiple air bags, back up sensors and cameras. What does this mean to you? It means that a common fender bender can now cost 3 times as much to repair compared to only 10 years ago.
- Low gas prices ad higher employment rates mean more people are choosing to drive over alternate means of transportation. The highest increase in drivers in 25 years was recorded in 2015. Driven annual mileage is also up by 3.5% per driver.
- Accidents are increasing. Due to distracted driving, all accidents are increasing in volume. In fact, a high majority of drivers admit to “risky behaviors” such as texting, making calls, playing with GPS, and the radio or even surfing the web. Up to 15% of drivers are considered “impaired” by drugs or alcohol during the daytime and that percentage rises at night. In 2016, deaths involving vehicles hit an all time high which is worse than 1966 when we didn’t even have seat belts.
- Medical inflation and increased claim complexity plays a big role. In a small fender bender, someone who would have simply dealt with having a sore neck is now encouraged to seek specialized medical treatment and file a claim for compensation. There are many advertisements on TV and billboards that encourage drivers to seek compensation for every little ache and pain. All those attorney’s fees add up to BIG costs for everyone.
Maybe after reading all the above you are thinking, “I don’t drive a new car and don’t engage in risk driving behavior so why do I still have to pay more?”
You may drive a 1996 Honda Accord because it is inexpensive to own, drive and fix, but your Honda is also capable of totaling a 2017 Range Rover. Now that would be an expensive bill no matter who is at fault. The fact that the expensive luxury car can be totaled by your inexpensive vehicle is exactly the reason that the insurance companies a have to take into account all cars and all vehicles into consideration when they create their rates. As long as your car drives the same roads as that Range Rover, you and the other driver will both be a key part of the same rate and price equation.
If there is one thing anyone can take away from this: Keep your auto insurance current and talk with an agent about the right needs for coverage to ensure that you will have a safety net if something happens. Accident survivors will tell you that having auto insurance coverage when they needed it was more valuable that they could have imagined.