Have you noticed an increase in your insurance price? It may leave you questioning what happened to you throughout the past few months for this increase, turns out nothing. You’ve maintained that flawless record and your address hasn’t changed nor the policy it self so it really does beg the question, what is going on?
I highly suggest taking a look at this video, it explains the top 3 reasons why your car insurance premium would go up without notice. Honestly, if that doesn’t do it for you, then read the transcript as well! It’s a great video giving you the insights as to why your insurance price goes up and catches you off guard.
Jeremy: Hey, this is Jeremy, from Shine Insurance, and today we’re going to talk about, why did my auto insurance price go up? Man, I get this question all the time, why did my auto insurance go up? I didn’t have any accidents, or any of that kind of stuff, why did it change? This video, I hope, will answer that question, for all of you. Let’s dig right into it. We’ll dig into the most common reasons your auto insurance price can go up, and there are really three, two of them being more common than the third. The first one is, very simply, a rate change, we’ll talk about that. Loss of discount, or discounts, and, then, coverage changes.
Those three things are the most common things that can change in your policy and make your price go up or down and we’re going to talk about each of those right now. But first, you need to understand a key term, and that key term, is the word renewal. A renewal, in insurance, is the end of one insurance policy term and the beginning of a new one. Every time you get your insurance policy, your auto insurance policy will have some dates on there. Depending on the term, it could be six months, or a year are the most common. There are other kinds too, but usually six months or a year, are the ones you’ll have. At the end of each of those terms, a new one will start.
When one term ends and a new term starts, that is called a renewal. That’s a key term we’re going to use, throughout this video. Like I said, most commonly, every six months or one year, there are shorter ones out there, but they are not very common. Let’s talk about the first reason your premium may have gone up and that is, simply a company rate change. At each policy renewal, companies have the right to change the rate they charge. This can be based on quite a few things. The most common thing that it’s based on, is claims paid out in the previous term.
If a company sees that they’re paying out a lot of claims, and ultimately losing money, then they’re going to raise the prices of those policies, so that in the next term they can make back the money they lost. They want to try and balance claims going out with a premium coming in, or the price of your policy coming in. If they feel like they’re losing money, then they’re going to increase premium, so that they can try and make that money back. A lot of times, that’s what happens. It could be the general profitability of the company. Sometimes, companies are losing money on something else, not auto insurance. Maybe it’s just poor management, or all kinds of different things.
They are going to increase the price you pay in an effort to try and fix that. Every company is managed differently and some are managed well and some are managed not as well. Companies have to make decisions and sometimes that’s based on the general profitability of the company. Whether the company wants to grow or shrink, in your area. Believe it or not, companies make decisions about certain areas of the country and say, “You know what, we just don’t want to get any bigger, in that space. We’ve got a lot of policies there, we don’t want to get any bigger. We’re going to start increasing our premium in that area,” and what’s going to happen?
People are going to leave, or new people certainly aren’t going to come in the door. That company is not going to grow in that area and likely they will shrink. Sometimes the price changes or price increases, have everything to do with the company just wanting to shrink in your area, or not grow, in your area and almost anything else. Now, companies do have to propose their rate changes, to a State Board of Insurance. They can’t just radically change their insurance premiums all the time for no reason, and have it move all over the place, but they can really make insurance premium decisions based on almost anything.
They do, though, have to make sure the Insurance Department is okay with that change. Company rate change, a huge reason why your prices could go up at a renewal. Here’s a rookie mistake, at least in my opinion, purchasing a six-month policy, instead of a 12-month policy. I think six-month policies are to the advantage of the insurance company and to your disadvantage. Why? Well, it gives them twice as many opportunities to change your premium. It gives them twice as many chances to increase your premium because of something and that is most often what happens. Are there times when premium goes down? Sure, there are.
I see that happen all the time, but, it’s more common that premium is going to go up. A six-month policy gives the insurance companies twice as many opportunities to make that premium change. In my opinion, pick a 12-month policy as opposed to a six-month policy. Reason number two, that prices go up, are a loss of discounts. Now, insurance is based on discounts. Discounts are everything in insurance and if you lose one, your price goes up. Now, I’ve created a video, that’s called The Eight Most Common Discounts for Auto Insurance. You should definitely check that video out on our YouTube page, in the auto insurance playlist.
It’ll dig more deeply into what these discounts are that you could lose, but, I’m going to go over them really, really quickly here. The eight most common discounts are a safe driving discount, the accident-free discount, credit, your credit score, the multi’s, multi-car, and multi-policy, those two different kinds of multi’s. Age and gender, believe it or not, affect your premium. A paid in full discount, if you’re willing to pay the whole policy in full. Loyalty discounts and introductory discounts, kind of opposite things, there, but those are discounts as well, and, finally, association or job discounts. Again, if you want to learn more about that, there’s a video in our YouTube channel.
You can also go down into the notes below this video and download an infographic we created, that has the eight most common discounts. You can use that infographic to look at your policy, and make sure you’re getting all the discounts that you should. Number two, is loss of discounts. The third one, not as common, but certainly worth mentioning, is coverage changes in your policy. Insurance companies can change the coverage options they offer you when a renewal comes up. This doesn’t happen a lot, but it can be confusing, and hidden in the renewal documents. Insurance policies could decide, for example, that they wanted to increase deductibles.
That they were no longer going to offer anything less than a $250 deductible. Well, if you have a $100 deductible, then that coverage is going to change at your renewal and go up to the $250 deductible. Now, this may not increase your premium, but sometimes, they’ll make those changes and increase your premium or not change your premium, at all. Your premium may not get worse, but your coverage got worse and, in essence, you’re paying more for less in those situations. That could happen as well with liability limits. They lower your liability limits and aren’t willing to offer as high of limits as you had before.
They don’t decrease your premium, because of it, so, you lost something, and didn’t gain anything. Then the last one, this is a little side one, but this example is the tiny things that can be changed at renewal. That is, like, removal of roadside assistance. Lots of companies offer roadside assistance as a part of their insurance policies. If they decided not to do that anymore, they could just remove that at renewal and not save you any money, things like that. You just have to watch out. It doesn’t happen very often, but knowing what coverage you have and making sure you understand it at each renewal, super important.
Something that all of your insurance agents should be willing to help you understand. All right, what did we learn? Well, we dug into the most common reasons your auto insurance price can go up. Those three are rate change, just simply, the insurance company increasing the rate. Loss of discounts, something changed in your scenario and that discount came off, and, therefore, your price went up. Finally, coverage changes, some coverage that the insurance company decided they don’t want to offer anymore and so they could change your coverage, sometimes making it worse, without making your price better. Ultimately you end up with something worse for the same price.
All right, that was the end of that. If you want to check out some of our other Shine videos, we just posted a great one, Adjustable Rate versus Fixed Rate Mortgage. This is a part of our new home buyer’s guide. I spoke with Ryan Langley, from Ruoff Home Mortgage and we talked about these two different kinds of mortgages, when each of those is the right option for you. Our Make Insurance Simple Course is a seven, eight video course, that is right there in a playlist on our YouTube channel. You can check it out if you really want to dig into home and auto insurance, we’ve got all the details there, for you.
It is definitely for people who want to learn a lot about home and auto insurance. Finally, if you just want to have fun, Deep Fried Turkey Fails, this is a bunch of people trying to deep fry turkey and failing miserably. You’ll laugh, enjoy that video if you’d like to. Last things as always, if you could subscribe to our channel, if you enjoyed this video, we try and create tons of good videos about new home buying and about insurance, that just simply tell you how things are. We’re not spinning it or anything like that, we’re just trying to tell you how it works, so that you can understand its role, in your life.
Finally, if you want to share this with friends, you definitely should do so in your social media networks. All right, it’s been great talking with you today, and until the next time, have a wonderful day.