Does your insurance renewal bill seem a little higher this time around? You are not alone. Every year, drivers in the U.S. face increased insurance premiums—sometimes for seemingly obvious reasons (like a speeding ticket), and sometimes for seemingly no reason at all.
Fortunately, there really is a method to the madness behind car insurance costs. We’ll talk about how car insurance works and the reasons why the cost of your car policy could suddenly go up.
So whether your renewal notice just went up by a few bucks or suddenly seems incredibly high, here are eight of the most common reasons you might see that increase—and what you can do to save money on car insurance.
There are many reasons why your car insurance increases year after year. Because auto insurance companies use a wide variety of information to assess risk, your payments can increase even if your driving record remains intact. Here are eight of the most common (but sometimes unexpected) reasons you might see your car insurance go up.
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1. You moved
It may sound strange, but moving is a common reason to see a rate increase. Because insurance companies tend to calculate premiums based on zip code, you may end up paying more (or less) after you make a big move.
Postcode rates are calculated based on risk. The risk assessed is primarily that of an accident or vandalism, which is why people in big cities tend to pay more for car insurance than drivers in the suburbs.
If the move changes your proximity to work, this may also cause your premium to increase. Driving longer distances is seen as a higher risk by insurance companies and they will increase your premiums to cover this risk.
But moving isn’t just a risk factor in the sense of more traffic or exposure to potential break-ins. It may also simply be a matter of local laws and the quality of the roads in your new neighborhood.
For example, the state of Louisiana consistently ranks as one of the most expensive states for car insurance. Far from being an overly dangerous place to live, this state is known for its poor road conditions and excess of lawsuits. All of this means that insurance agencies require residents to pay more for their auto insurance policies.
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2. Your credit score dropped
Credit scores matter in some unexpected ways. They aren’t just used by the big banks to determine whether you qualify for a loan; they are also used by car insurance companies to predict how likely you are to make a claim. And while you’ve probably heard that some insurance companies “don’t look at your credit score,” they do—they just call it something else.
By analyzing selected information from your credit reports, insurance companies estimate what is called your credit insurance score. The reasoning? Research shows that people with higher credit scores are less likely to get into accidents or make insurance claims than people with lower credit scores.
Regardless of what it’s called, auto insurance companies look at your credit score, and if it drops, you could find yourself paying more for what your auto insurance covers. On the other hand, if you improve your credit score, you can also improve your car insurance rate.
3. Speed limits are increased
Have you noticed higher speed limits in local travel? This could be another reason for the increase in car insurance costs. When states increase their speed limits, it can unfortunately be associated with more accidents on the road.
If you live in a place that has recently raised speed limits, you should expect to pay more for auto cover at your next policy renewal.
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4. Your state legalizes cannabis
While not enough time has passed to tell whether legalizing marijuana actually leads to more car crashes, a study of some of the first states to legalize it showed a possible connection.
The bottom row? This could easily lead to higher insurance costs for drivers in places where marijuana is legalized. If you live in (or have recently moved to) a state with legal cannabis use, you may end up paying more for car insurance.
5. Other environmental risk factors have increased
Auto insurance premiums can go up for a number of reasons, not least if your state legalizes cannabis or decides to increase speed limits.
Other environmental risk factors that can cause your insurance company to charge you more include things like an increase in the number of uninsured drivers, more extreme weather events, more accidents caused by distracted drivers, or even an increase in local crime rates.
Any number of things or combination of risk factors can result in insurance companies charging more, especially if those risk factors result in more claims being paid out.
6. Medical and repair costs have increased
Another unpredictable reason your insurance may go up? When repairs and medical expenses start to cost more. The more insurance companies have to pay to cover property repairs and medical expenses, the more they will charge you for coverage.
If costs have recently risen in these industries, those costs will quickly trickle down to your level in the form of higher levels of coverage.
7. You have been in an accident or received a fine
As well as all the unexpected reasons car insurance can go up, there are also the obvious ones – such as if you get a speeding ticket, get caught for a traffic violation or are involved in an accident that is considered your fault.
A DUI is another quick way to pay a lot more for coverage or even lose your insurance coverage all together since you would be considered high risk from the insurer’s perspective. Moving violations, which are defined as any violation of the law committed by a driver while driving, are another reason why you may see an increase in your insurance bill.
The best way to avoid such increases is by keeping a safe driving record. Another good reason to keep your driving record intact? Over time, being classified as a safe driver can actually become a factor in when your auto insurance rate starts to drop.
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How to save money on car insurance
Saving money on car insurance might sound complicated, but it’s not. Assuming you have a safe driving record, comparison shopping is a great way to get the best car insurance rate. Start your search online and compare multiple car insurance quotes for the same coverage from different providers. This should give you an idea of what you will actually have to pay for the coverage you want.
Even if you don’t end up switching insurance providers, you can still save more than your paycheck with your current provider by tweaking your plan a bit. This could mean choosing a higher deductible for car insurance or even dropping the types of extra coverage you don’t need, such as comprehensive insurance coverage on an older car. If you’re happy with your current provider, give them a call and talk to them about how you can save money on car insurance by changing some details on your policy.
Another great way to save a bit on insurance coverage is by bundling different types of insurance coverage with the same provider. If you have other types of insurance, such as renters or homeowners insurance, you can actually save quite a bit of money by buying them all from the same provider.
It’s normal for car insurance to go up in price, but that doesn’t mean you have to pay for it. Depending on why your rates have increased, you may have the option of seeking insurance quotes for a new policy, either from your existing provider or a new one.
Knowing these common reasons for insurance increases will allow you to make the best decision when it comes to the cost of your car insurance.
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This article 7 Real Reasons Your Car Insurance Is Going Up (and How to Lower It) originally appeared on FinanceBuzz.