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One question we often get is, “Why are my premiums going up?” We understand increasing premiums can be frustrating, especially if you've had no claims or accidents over several years. There are numerous reasons why your personal insurance premiums may go up, and we can assure you it's not because insurance companies are greedy. Some of these factors you have control over, and some you don't.
Let's begin with a quick review of how insurance works.
For example, if you own a home worth $500,000, most people cannot afford to cover a loss for that amount. Therefore, you pay a small premium to an insurer to take on that responsibility for you. That insurer makes the same arrangement with thousands of other homeowners. In the event of a total loss, you would be paid $500,000 to rebuild your home. Keep in mind that the insurer is taking a chance that not all the homes they insure will not have a loss at the same time.
There are specific reasons why insurance premiums or rates increase, which can include the following:
- Insurance Company or Industry Operations — The insurance companies who insured the homes and businesses in the recent forest fires will most likely need some level of a premium increase. Having a large number of claims in a short time period puts pressure on the insurer to increase their rates to recuperate for this loss. That's why after any natural disaster insurance premiums tend to go up. It's important to note that insurance rates are controlled by the State of California, so only they can approve rate changes.
- Economic and Financial Conditions — If the economy is doing well, more people buy insurance, which actually helps reduce insurance premiums across the board. Also, if investment returns are trending upward, then the insurer is given more flexibility because of this.
It's under these conditions in which the insurance buyer cannot influence insurance premiums. The good news is many actions or conditions within our control can lead to increased or decreased premiums.
What Causes Auto Insurance Premiums To Go Up?
- Type of car — Different cars cost different amounts to insure. Vehicles with poor safety ratings will cost more as they tend to cause a greater number of injuries. By the same token, a vehicle with more safety features will cost less to insure. Also, some foreign cars cost more to repair, which will result in a higher cost to insure. In the market for a new car but don't know how much the vehicle make and model? Call one of our agents before you make your final decision on an auto purchase to understand how the insurance costs could vary.
- Where you live — It costs more to insure your vehicle if you live in a highly populated city as opposed to a smaller town or the suburbs. This is because the more vehicles that are on the road, the greater the chance of having an accident. The claims within each zip code will most likely have a different number of auto accidents, thefts, vandalism, fraud and other issues affecting claims and premiums.
- Accidents and violations — If you have more than one accident or violation on your record then your premiums may go up. Some insurers offer accident forgiveness for your first accident.
- Age of drivers on the policy — Younger drivers cost more to the insurer since they are the least experienced behind the wheel and statistically are prone to being in more accidents.
- Not requesting available discounts — We can help you identify what auto insurance discounts you might be eligible for, which could help reduce your overall costs. If you buy your insurance online, you may not even know that there are discounts you qualify for.
- Gender — Most insurance companies develop rates based on gender. This is because data shows that males are more likely to have accidents than females.
- The purpose for which the vehicle is used — Research shows that vehicles used to commute to school or work regularly are more likely to have an accident than those used for other driving purposes.
- How many miles you drive — If you tend to drive more miles than the average car owner, then you have a higher risk of being in an accident than those who drive less.
What Causes Home Insurance Premiums To Go Up?
- Age of your home and roof — As your home ages, the materials used in its construction tend to wear and can create problems such as water damage. Replacement costs, including material and labor, go up over time. So the older your home, the more expensive your rate could be.
- Pools and trampolines will increase costs — Pools and trampolines are fun, but they are responsible for numerous injuries each year. Having either one of these at your home creates more risk for you and your insurer.
- Not having a home security system — Home security systems are an easy way to reduce your premiums. Homes with security systems are less likely to be burglarized, so insurers can reward these homeowners with savings.
- Where you live — Your home’s distance to a fire station, among other factors, will help determine a part of your home insurance premium.
- Owning high-end jewelry, guns, or art — If you own highly valued items, then it will cost more to insure them since the potential financial loss is higher. Make sure to disclose all your treasures and collectibles when obtaining your policy.
- Claims history — This is a no-brainer. If you have frequent claims, your premiums will go up. Chris Hackett, Senior Director of Personal Lines Policy at the Property Casualty Insurers Association of America, says, "There's a significant correlation between claims that are made and future additional likelihood of claims being made.”
Want to learn more ways you can reduce the cost of your insurance premiums? Call one of our professional insurance agents today to see how we can get you the best coverage at an affordable price.