Why Is My Car Insurance Premium Rising?
When you buy car insurance, you have to pay a premium, or base rate. The amount of your premium is a reflection of how the car insurance company sees you; the higher your premium, the more the car insurance company sees you as a liability. You may feel like rises in your car insurance premiums are arbitrary, but there are specific predictable and measurable factors that determine how much you're going to pay.
Other People Are Reading
-
Calculation
-
Car Insurance Rates explains that a credit scoring company, Fair Isaac & Co. (FICO), approached car insurance companies in the 1990s to drum up business. When FICO was able to show a correlation between bad credit and increased liability, car insurance companies started gathering statistics on other factors, such as race. As of 2010, your car insurance companies use charts based on statistics for these correlations to determine whether they're likely to pay out money to you.
Supply and Demand
-
In the United States, as of 2010, you are required by law to insure your vehicle if you intend to drive it on the roadways. You can shop around for a better premium if one company charges too much, so you do have some control over the industry. However, car insurance companies know that car insurance is something you have to have, so they're able to ignore what you truly want to pay to a certain degree. Your company remains competitive even if its premiums are unreasonable as long as its prices are lower than those of other companies.
-
Life Changes
-
Your insurance premium is affected by life factors. Even if your own driving record is flawless, your insurance premium still may rise if you move, get a joint policy after marriage or add a teen driver, default on loans or buy a house, or decide that a brand new station wagon fits the needs of your growing family better than the old beater two-seater you've had since high school.
Discrimination
-
Car Insurance Rates points out that car insurance companies make no effort to hide the fact they charge different rates to different people. However, because the car insurance companies are rationally applying statistical data, legally, the courts generally do not consider charging different premiums to different people as discriminatory, unless it can be shown that the formulas used by the companies purposely favor particular groups without justification.
Keeping Costs Low
-
You might get a discount if you shop around and can come in to your insurance company with a lower quote from someone else, since it's easier for your company to maintain your business than to find a new client. Additionally, companies don't always volunteer the discounts they have, so you may lower your cost just by asking a few questions and proving that you qualify for what the company offers.
-
References
- Photo Credit luxury car - model toy car image by alma_sacra from Fotolia.com
