Friday, 1 July 2011

Why Did My Car Insurance Premiums Randomly Go Up?

At the beginning of a new policy term, you may see increases in your premiums which can appear random. But, while it may appear that your insurance is increasing without reason, there are very sound explanations for such increases. Inflation, changes to your car and home address, added drivers, and at-fault claims can all contribute to an increase in your premiums.

Inflation is an economic process whereby prices increase and the purchasing power of currency decreases. In a healthy economy, this occurs at a slow and steady rate. It's the reason your grandparents talk about the "good old days" when they could buy a loaf of bread for a dime or a Coke for a nickel. Inflation affects insurance companies as well, and every number of years insurance companies will increase their premiums to compensate for inflation. This is a natural and normal increase, and is nothing to be concerned about.

Change in vehicle
Changing your insurance policy over to a newer or more expensive vehicle can often result in a spike in your insurance premiums. Newer cars are typically more expensive to repair in the event of an accident or vandalism, thus making it more expensive for your insurance company to insure. More expensive cars also tend to be pricier in the same way. Therefore, if you decide to jump from the Civic you're driving up to a brand new Maserati, expect to see your premiums go up!

Moving to a new address
Different neighbourhoods have different conditions which may affect your insurance premiums. If you move to a particularly crime-ridden end of town, you may see your Comprehensive Insurance, which covers theft and vandalism, increase. If you move into the city from the countryside you will also see an increase, since you are statistically more likely to have a collision in a city --where there are more cars-- than in the countryside. When evaluating a move, always keep in mind the effect this may have on your auto insurance premiums.

New drivers
If your child has received his or her driver's license and has been added to the family insurance policy, you will see an increase in your rates. If you make the addition mid-way through the year, you can expect to pay a partial premium the next year -- most companies will not immediately increase your premiums.

At-fault claims
If you've filed any claims with your insurance company in which you were at fault, you will likely see your rates go up. The fact of the matter is, the more at-fault claims you have, the more your insurance company sees you as an increased risk.

Understanding the reasons behind the hikes in your insurance can help you anticipate potential increases. When you encounter these "random" increases, it is also a good time to shop around. Insurance providers have very different ways of calculating risk and premiums will be affected in different ways by different companies. For instance, one company may have the same rates for those living in the city and those living in the country, while another will adjust premiums to compensate for the added risk of living in a city. Talk to different brokers and get online quotes where possible to make sure you're not overpaying for insurance.


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