I had an interesting comment on a recent post, in which I was discussing the value of a broker, using the example of one claims case where our involvement and expertise allowed for over $2,000 more than the person originally thought they would get. On the post comments, "Emily" wondered why her car insurance doubled since last year.
An excellent question.
The answer to questions like this in insurance are complex and require thorough review of many "underwriting" details. These details are precisely why a broker can be a handy resource to you.
Since Emily is not one of our clients, I could not pull out her file and give her the direct answer, but what I tried to do was give her all the factors that I thought might have affected her rates. I encouraged her to then use this information to call her own representative and hope that this will help her get a handle on her own insurance and get some of those savings back, or get an understanding of what happened.
So, for all of you out here who have seen a rate increase in your car insurance, or for those who wonder why your insurance doesn't go down every year, I am sharing my response.
Please let me know what you think and what your experiences have been too. After all that's why we are here, to learn, share and communicate together!
Why did my car insurance rate go up, even though I didn't have any accidents?
There are so many factors involved in rating car insurance, each state, province and country has different regulations and requirements, so I can not speak for the specifics of your insurance, but I can give you some ideas on a general level to guide you.
One of the biggest comments I get as a broker is that the car is one year older and that their car insurance has increased, yet the value of the vehicle has depreciated.
- This one is an interesting point, unfortunately despite the fact that the vehicle value has gone down, replacing a door or a car part due to an accident may still be just as expensive on a new car as on a 3 year old car. So the "coverage" you are paying for is not limited to a theft coverage, it includes repairs.
- The liability portion of your insurance does not change based on the age of the car, a 20 year old car, can likely be the tool of as much damage as a 2 year old car. Again - Value of vehicle decreasing, rate of insurance remaining the same.
The area you live in also comes into play.
- Was there a higher incidence of theft or accidents in your area last year over the previous years?
- Maybe the insurance company adjusted their rates because of this?
- Did you move to a new neighborhood? Sometimes a few blocks makes a difference. Call your car insurance company and get a quote before you move. If you lived in a suburb, then you moved into the city, we often see drastic increases.
Did your occupations, place of work, martial status, age, address, conviction record (speeding tickets etc) change?
- Some companies include discounts for lower commutes to work (or no commute) There are also charges for change of use of vehicle, for example if you used to only use it to commute to work, then suddenly are now using it for occasional business to visit clients, etc. an adjustment may be necessary. Find out what the reason of the change is, maybe you can deduct business use from your company, or expense it from your work. There may be an option.
- Some companies offer discounts for occupation, for the employer you work for (group rates) or for having a university degree - if you qualify make sure that discount stays on your rating. If you change employer sometimes it can effect your rate.
- If you are under 30, some companies offer discounts if you are married, which bring you to the same rating as someone over 30 . Some companies also offer age discounts as you get older, or retiree discounts. Make sure you get every discount you are eligible for.
- Address, outlined in my point above.
- Conviction record- if you have many speeding tickets or traffic violations, it is an indicator of the type of driver you might be. Multiple infractions can lead to drastic surcharges on a policy. So nothing else may have changed, but with a high infraction rate, your price could potentially increase significantly. You would also, in addition, potentially lose discounts for being "conviction free" - offered by some insurers.
Did you add a new driver to the policy?
- Second or third drivers on one car can impact the rate.
- Young drivers can impact the rates, various insurance companies charge different rates for young drivers. In cases where you have added a young driver, it is worth shopping around because some companies have special considerations which will save you money, where others do not. When your circumstance changes, it is worth asking your representative if the company you are with has favorable policies regarding young drivers.
- Added tip: If you had a young driver and they are away at College, ask your insurer if they have a "student away at school discount" and what the conditions are. This can often cut the cost in half.
You may have had no accidents, but did you have claims?
In our minds, accidents usually involve collisions with something, however there are other reasons besides collisions that insurance companies pay out in claims. A lot of times people forget about these small incidents, but they are still claims paid by the insurer, and may still effect your rate. Besides accidents, did you make other claims for example windshield, or vandalism?
Some companies give discounts to people with flawless records, unfortunately, when the person has a claim, they will loose this flawless record discount. That can hurt.
In my experience, the changes above do not normally equal a doubling in rate, so I would explore even further.
- Is it possible that your insurer suddenly introduced a new rating method, like using credit scoring into their calculations?
- Did you authorize the credit scoring? If you don't, I have seen companies use standard non preferential rates when the credit scoring is unobtainable. Often approving the credit scoring , in my experience, has allowed for a drop in price by half. Before you authorize credit scoring, ask your representative about the possible effects on your rate. Specifically ask if it might penalize your rate or reduce it .
The other factor that you may consider is whether or not you used to insure other things with the same company, and have since cancelled them
- Multi vehicle discounts, and Multi policy discounts can often grant up to 40% in premium reductions.
- If you used to insure your home with the company and now switched to go elsewhere, the discount you had on your car may have been deleted.
Finally, there may be an error in the rating of your policy.
- Yes, errors do happen, and often, as brokers, we spend time correcting the document we receive from the insurance company. We have to analyze the file, and review the factors they entered to rate the renewals. We often find opportunity for improvement. Insurance companies usually have machines generate renewals, machines sometimes have glitches and errors.
- Get your agent or broker or representative involved and you may find there is room for improvement!
There are so many possibilities including regional regulations and discounts that could apply that I strongly recommend with the overview I have given above to call your insurer and ask them some questions. I am sure they will have some explanation, and perhaps in the process you can get those rates back down.
I would like to thank "Emily" for sparking this post with her question, as you can see there are a lot of factors to consider.
It pays to deal with an experienced representative because there are so many contributing factors to negotiating insurance, it helps to have someone on your side working for you.
The above list gives an idea of the things I would check and where to start. I hope this helps put things into perspective and that it gives you a starting point to open the dialogue which will save you some money on your insurance costs!