6 Reasons Why Your Insurance Premiums Go Up
Common reasons why your insurance rates have increased.
1. A rate increase by your insurance company.
2. Multiple small claims
3. One or more large claims
4. A change in your household such as:
- A new driver in your household
- A home addition or remodel
- Addition of a swimming pool or trampoline
- A new family dog
(How Owning Certain Dog Breeds can Effect Your Insurance) - Addition of a home based business
5. Auto accident
6. A low credit score or downgrade to your credit score
What to do if you experience a rate increase.
First of all, don’t panic. Just like most things in life, from the cost of a gallon of milk to the price of a new car, prices go up and seldom go down. One way to help control the cost of increased premiums is to avoid activities that will cause your rates to go up in the first place such as filing homeowners claims, getting a speeding ticket or adding a trampoline to your backyard. Another way to save money on your premiums is to increase your deductibles. Raising deductibles can lower your premiums. One last way to save money is to take advantage of policy discounts such as bundling accounts and loyalty discounts. Also, keep in mind that sometimes a rate hike is necessary to get the coverage you need for your changing family and lifestyle.
Below is an explanation of the types of events that may cause a rate increase and what you can do about it.
Your insurance company increased your rates: Ask your insurance advisor if there are better rates with another company, or if it makes sense to absorb the rate hike. There are a few reasons why to accept the rate hike instead of changing carriers might make sense. First of all, a rate hike from one company may indicate a trend where others may follow. If you change providers to avoid an increase you may end up in the same situation next year with your new provider. Also, you may lose discounts and benefits you have with your current provider such as accident forgiveness or a customer loyalty discount.
You’ve filed multiple small claims: Sometimes small claims can have just as big an impact on your premium as large claims. Your insurance provider may see many small claims as a problem just as they would see one big claim as a problem. When you suffer damage or loss to your home or auto, your first reaction may be to call the insurance company and file a claim. Before you make the call, take a step back, and consider the cost of doing so. First of all, is the cost to repair or replace a damage or loss is roughly the same or a little more than the amount of your deductible? Secondly, paying out of pocket keeps the claim from showing up in your policy history which may put you at risk of increased premiums down the road? If you’re having trouble weighing the pros and cons consult with your insurance advisor and they can help you decide whether to file the claim with your insurance provider.
You’ve filed a large claim(s): People rely on their insurance companies for coverage on high-cost losses and damages. Your policy helps protect you from catastrophic financial loss and often the best choice is to file the claim. Once you’ve made a claim it becomes part of your insurance claims history. Consult with your insurance advisor regarding potential rate hikes as a result of your claim so you can prepare for any changes in the cost of your premiums. Each case is different, so it’s best to discuss your unique situation with your account representative.
You’ve experienced changes in your household: Notifying your insurance advisor about changes in your household is for your protection. Your policy is based on your coverage needs. The worst thing that could happen if you suffer a loss associated with a change in your household and not have the coverage in place to pay for your damages or loss leaving you vulnerable to a significant financial loss.
You’ve had an accident(s) or traffic violation(s): Avoiding a rate hike if you have an auto accident unless you have accident forgiveness. Accident forgiveness is one way to help avoid rate hikes. If you do not have accident forgiveness keep in mind that accident claims on your auto policy affect your rates for a set amount of time, typically three years. Once you are accident-free for a period-of-time, your rates may be readjusted back to a lower rate. If you have an otherwise good driving record, your rates may or may not go up. Each situation is different. Consult with your insurance advisor on the impact the accident claim may have on your insurance rates.
You have a low credit score or downgrade to your credit score: A poor credit score or a downgrade in your current credit score can have an adverse effect on your insurance rates. The amount of the increase varies from state-to-state. Three states prohibit the use of credit scores as part of the rating process. These states are Massachusetts, California, and Maryland. Insurance companies use credit scores as only one factor in determining your insurance rates. A poor credit score points toward irresponsible credit behavior which insurance companies have found correlates with higher insurance risk, and since the insurance companies main objective is to manage risk, your credit score is a key factor. Your credit score is used to establish your Insurance Credit Score. If you’re concerned about negative credit affecting your insurance rates, there are a few things you can do to help manage the adverse effects. First of all, consult with your financial advisor about ways to improve your credit score. It won’t happen overnight but improving your score is a worthwhile endeavor. Secondly, ask your insurance advisor which companies use your Insurance Credit Score to establish your rates. While most companies will use your Insurance Credit Score in calculating your rates, their emphasis on it and the formulas they use are different. A poor credit score or downgraded credit score may not impact your rates in the same way from company to company. If you have a problem, an independent agent is a good person to turn to because they represent several different companies and will have a good sense of which one will be a good fit for you in your current situation.
Getting the most out of a family budget is a top priority for many people so it’s natural to feel frustrated when the cost of your insurance premiums goes up. There are ways to thwart rate increases such as, minimizing risks and maintain your property to prevent claims from happening in the first place, avoiding making multiple small claims, and maintaining a good credit score. Sometimes a rate increase is unavoidable because of an increase by your insurance company or because of a large claim that you filed. Keep in mind that rates may increase due to the changing coverage needs of your family. It’s important to balance price without sacrificing protection. If you experience an increase in your insurance rates consult with your insurance advisor. They can help explain the reason for the rate increase and suggest ways to minimize or avoid the increase.
We look forward to helping our customers navigate the ever-increasing complexities of personal and business insurance by helping them understand their policy and their options.
