Are you being hit with a big premium hike on your auto insurance — even though you haven’t had any accidents or tickets? We’ve got an answer to that vexing question of “Why did my car insurance go up?”
6 factors that can secretly drive your car insurance up
There are actually a couple of important external factors at play that may be driving up rates across your entire state, according to money expert Clark Howard.
“First off, the number of accidents is going up because of distracted driving. And, second, with so much technology being built into cars, the cost of repairs has skyrocketed. So, you have a lot of vehicles that would once get fixed being declared a total loss by insurance companies and they have to pay for that.”
Of course, that’s just the tip of the iceberg when it comes to reasons why your car insurance is going up…
Table of contents
- Credit score changes
- Change of address
- Roadside assistance
- Relationship status change
- Not-at-fault accidents
- Mileage change
1. Credit score changes
Have you recently missed a payment, charged up a lot of your available credit or opened new store credit cards? All of these are factors that will temporarily lower your credit score.
Insurers are permitted to use your credit score to help set your premiums in all but a handful of states. We’ve got an in-depth look at how and why the industry adopted this practice here.
But if you think insurance should be a merit system based on how many claims you have — rather than your financial state of being — you’re not alone.
“The whole credit score thing in insurance drives me to distraction,” Clark Howard says. “If you’re paying more than you think you should be based on your driving record, this could be the reason why.”
2. Change of address
A recent study from the Consumer Federation of America (CFA) finds many auto insurers are setting rates not based on your driving record, but on your street address and the neighborhood you live in.
Progressive and Farmers were both singled out as two insurers who do this the most. You can see the full study done by the CFA here.
Of course, this factor can work to your benefit, too. For example, our team member Sally and her husband recently moved, but forgot to update their address with their auto insurer. When their auto insurance increased, they were looking for ways to lower the bill.
It turns out the solution was as simple as informing their auto insurer of their new address!
“By updating the address with our auto insurance, our bill decreased by $10 every month ($129.30 to $119.64),” she says. “So the recent increase was offset by our new location savings.”
3. Roadside assistance
Clark has talked before about the dangers of using roadside assistance or free towing from your insurance company.
Some auto insurers treat your use of roadside assistance as an at-fault claim and put that through on your C.L.U.E. report. If you have too many claims on your C.L.U.E. report, it will make you radioactive to other insurers. That effectively locks you in with your current insurer because it limits your ability shop with competitors.
“That ‘free tow’ could be the most expensive tow you ever have,” Clark says.
The solution here is to skip the roadside assistance from your insurance company and get it from a third-party like AAA. They won’t report your use of roadside assistance to any centralized insurance industry database.
4. Relationship status change
So what’s the connection between relationship status and what you pay for car insurance? Let’s just say that “it’s complicated,” to borrow a phrase from Facebook.
Married couples statistically file fewer claims than drivers who are single, divorced or widowed. That’s why when a single person gets married, they’ll typically save some $90 annually on policy premiums, according to The Zebra’s latest State of Auto Insurance report.
Unfortunately, the reverse can be true, too. If you get divorced or become widowed, there’s a chance you may be surcharged on your policy because of the unfortunate change to your relationship status.
However, we should note that some states ban the use of marital status in setting insurance rates. These states include Montana, Massachusetts and Hawaii.
5. Not-at-fault accidents
It’s unfortunate, but true: If you’re involved in any way in a not-at-fault accident, some insurance companies will jack up your rates.
One member of Team Clark found his auto insurance rates spiked by 15% when a neighbor who parked next to him banged up his car while leaving a parking space. Our team member was not at fault and in fact wasn’t even present when the damage happened! Yet his premium went up anyway.
In fact, a recent study from the Consumer Federation of America quantified which insurers are most likely to penalize not-at-fault drivers. Progressive was the single worst offender, followed by GEICO, Farmers and Allstate.
6. Mileage change
The final factor that could potentially drive up your car insurance is a change to your commuting pattern.
In fact, an increase in annual miles driven from 5,000 to 20,000 translated to a 9% average rate increase, according to a recent InsuranceQuotes.com study.
However, we should note this factor will only impact those who are either regularly self-reporting mileage to their insurer or using a telematics device for pay-as-you-drive insurance.
As you can see, there are a number of possible answers to the question of “Why did my car insurance go up?” It may seem like it happens for no reason, but that’s usually not the case.
In addition, there are also larger industry trends at play driving up your rates periodically.
“Insurance companies are always doing this back-and-forth between fighting for market share and increasing profits,” Clark says. “When they’re fighting for market share, they keep premiums low. But when they feel like they have enough market share, they need to make a profit. So they have to raise premiums. It’s a never-ending cycle.”
Of course, nobody wants to be stuck paying an unnecessarily high premium. If that’s the boat you find yourself in, the solution is to re-shop your auto insurance.
But here’s one caveat when you’re shopping around: Don’t be lured in by an unusually cheap premium. That often means one of two things — you’re either getting lesser coverage or you’re getting it from a company that doesn’t have a good reputation.
“Sometimes you’re better off paying a little more to be with a quality insurer who will be there when the chips are down,” Clark says.