As consumers, we tend to assume that things will stay the same, more or less, forever. When we get a quote for car insurance and we sign up for a policy, we implicitly assume this is the rate we’re going to pay indefinitely. But oftentimes, consumers are faced with rate increases eventually.

Why Do Car Insurance Rates Go Up?

Why do car insurance rates go up over time?

What to Do If Your Car Insurance Rate Goes Up

First, understand that if your car insurance rates increase, there are some actionable steps you can take to resolve the situation:

  • Figure out why. Work to understand why your premiums went up. Your insurance company may send you a written explanation for why your insurance rates increased, or you may have to ask them directly. Either way, you should get an explanation for the rate increase – and you may be able to take countermeasures.
  • Analyze your budget. Take a look at your budget. Is it possible to make this new rate work? It may feel like you don’t have much of a choice, but you do have other options.
  • Get new quotes. Make sure you get new car insurance quotes to see if the increased premiums are in line with the rates offered by other companies. In many cases, you can find a cheaper rate for a similar policy. Switching providers could be all it takes to get back to your original rate – or something even lower.

Still, it pays to know why rates go up sometimes.

Why Car Insurance Rates Go Up: Broad Factors

Car insurance companies are occasionally forced to increase rates for all (or nearly all) policyholders for a few reasons:

  • Higher risk of accidents. If the rate of car accidents is steadily increasing nationwide, the company will make more payouts. To compensate for this, the company will need to increase premiums. However, these increases are usually rare and slight when they occur.
  • Inflation. All of us have to deal with the effects of inflation. A little bit of inflation is good for the economy, stimulating consumer spending and demand, but it has the negative consequence of increasing prices.
  • Compensation for additional costs. Some companies may offer new services, make investments in new technology, or take on additional costs in other ways – many of which ultimately benefit consumers. It’s possible for a company to increase its rates to compensate for these additional costs.

Why Car Insurance Rates Go Up: Individual Factors

More commonly, car insurance premiums increase for an individual – rather than for every policyholder with the company. These are some of the ways it can happen:

  • Accidents. It shouldn’t surprise you to learn that if you’re involved in an accident, your rates will likely go up. You’ll be seen as higher risk (a common thread among these factors), and your prices will increase accordingly. Note that this can happen to you regardless of whether you’re at fault in the accident.
  • Other claims. Collisions aren’t the only direct way you can be seen as a higher risk. You may see your rates increase after any kind of claim, whether you’re covering an incident of theft, vandalism, or something else covered in your policy.
  • Incidents in your area. Though it has nothing to do with your personal habits, if there’s an increased rate of accidents (or claims) in your city or neighborhood, your rates will likely increase. Again, this is an indication of a higher risk that must be compensated.
  • New vehicles. Adding vehicles to your policy will necessarily increase your rates since you’ll have more potential incidents and higher potential payouts.
  • New drivers. Similarly, adding drivers to your account can increase your rates.
  • Speeding tickets and moving violations. Most of us have received a speeding ticket or another moving violation at some point. Even the best drivers among us occasionally make mistakes. Unfortunately, these data points inform an insurance company that you’re a higher-risk driver than before – and your rates will increase accordingly.
  • Moving to a new area. Your insurance premiums are calculated in part due to the risk level associated with your neighborhood. If you move to a new place with higher crime rates and/or higher rates of car accidents, it could impact your premiums.
  • Changes to your practices. You may also see an increase in your car insurance rates if there’s a significant change to your lifestyle and regular driving practices; for example, if you go from working from home to having a 45-minute commute, you’ll be on the road more often, and will be more likely to experience a collision.

Whether you face one of these factors or there’s something else going on beyond your control, your car insurance premiums may eventually go up. If you find yourself in this situation, talk to your insurance company (or your insurance agent), get some new quotes, and work actively to get your rates back to where they belong.