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Your car insurance bill can be a significant monthly budget item. If you get in an accident or receive a moving violation, you may worry that your insurance rate will instantly increase.
Fortunately, your car insurance rate is typically locked in for the duration of your policy term, which is usually six months to a year. But making certain changes—like moving to a different ZIP code, adding a new vehicle or increasing your coverage limits—could trigger a rate increase now.
Why Did My Car Insurance Rate Go Up?
Car insurance rates take effect when you start or renew a policy—not during the policy term. For instance, your rate won't increase during the policy term immediately after you file a claim, get into an accident or get a traffic ticket. However, your rate will likely change during the policy term if you make changes to your policy.
Here are some actions that may prompt a rate change before a policy term ends.
Adjusting Your Coverage
Insurers generally let you make changes to your coverage before a policy term expires, and these changes normally take effect right away. Your insurer will then adjust your premium accordingly. So you'll pay more to add optional services, like roadside assistance or rental reimbursement. A boost in your car insurance rate could also happen if you bump up the dollar limits for bodily injury and property damage liability coverage before your policy term ends.
But the opposite is true too: The insurer should send a partial refund if you lower your policy limits or remove services.
Changing Your Deductible
If you're looking for ways to reduce your monthly expenses, you may decide to increase your insurance deductible. A deductible is the amount of money you pay out of pocket, such as $500, before insurance kicks in when filing an insurance claim. Increasing your deductible can help lower your rate, while reducing the deductible can cause your rate to go up. These changes can impact your premium immediately, since they affect your current coverage.
Adding or Removing Drivers
Adding a driver to your policy or removing a driver during the current term also can affect your rate right away. For instance, if you add your 16-year-old daughter to your policy halfway into the policy term, your rate likely will climb. On the flip side, if you remove your daughter who just graduated from college from the policy before the term ends, your rate likely will decrease.
Adding or Removing Cars
Just as your car insurance rate changes when you add or remove drivers, it also changes when you add or remove vehicles.
Maybe you've decided to become a one-car household instead of a two-car household and sell your old minivan. In this case, removing the minivan from your policy almost certainly will trigger a rate decrease. But if you add a vehicle, your rate almost certainly will increase.
Moving to a New Place
When setting car insurance rates, your insurer looks at where you live to predict the likelihood you'll file a claim. Generally, rates are lower in ZIP codes with low crime rates, low population densities and less traffic. So when you move to a new ZIP code, your rates could change—even if you're relocating just a few miles down the road.
If you moved from an area with few car thefts to a new ZIP code with a higher crime rate, for instance, it raises the odds of filing a car insurance claim. As a result, your premium may jump.
Getting a New Car
Decided to trade in your lower-value SUV for a higher-value sports car? Your car insurance rate could go up immediately to account for covering a more valuable vehicle. On the other hand, if you downgrade from a newer pickup truck to an older pickup truck to save some money, your car insurance rate could go down.
When Are Policyholders Notified of a Rate Change?
By law, your car insurance company must notify you of any rate changes. The timing of the notification usually depends on the reason for the change.
- Policy adjustments you initiated: If you make changes to your policy—like adding a driver or increasing the dollar limits on your coverage—you'll find out about premium changes immediately or within a few days.
- Rate changes by the insurance company: Your insurance company may adjust your rate due to factors like new state regulations. In these cases, the company must provide advance notice. That's often 30 days, but the timing and process depend on laws in your state.
- Loss of discounts or adjustments due to misrepresentation: Your insurer may also adjust your rates if you no longer qualify for a discount. The company typically notifies you soon after the adjustment is made, either immediately or within a billing cycle.
- Nonpayment or reinstatement: If your policy lapses and is reinstated, any premium changes will be communicated along with the reinstatement terms.
In most cases, the notification will come in the form of a revised billing statement, policy update or an official letter sent via mail or email.
When Do Changes to My Car Insurance Policy Take Effect?
The timing depends on the type of change and your insurer's policies. For instance, your policy could change immediately when you:
- Add or remove a vehicle
- Increase or decrease your coverage limits
- Add or remove a driver
- Update your address
Or, your policy adjustment could be delayed. This could happen if you:
- Qualify for new discounts
- Lose a discount
How to Lower Your Car Insurance Rates
So, what can you do if you've been told your car insurance rate is going up? You may be able to help soften the financial blow.
- Shop for a better rate. Every car insurance company has a different way of setting rates, so one may have a better deal than your current provider. Consider getting car insurance quotes and comparing offers from at least three companies.
- Drop coverage you don't need. If you've paid off your car loan, you can also save by getting rid of comprehensive and collision coverage. Generally, this can make sense if your car is an older model and only worth a few thousand dollars.
- Increase your deductible. Raising your deductible by a few hundred dollars can help lower your premium, too. Just remember you'll be on the hook for higher out-of-pocket costs when you need to file a claim.
- Switch to pay-per-mile coverage. If you don't get behind the wheel that often, pay-per-mile car insurance may be cheaper than traditional coverage.
- Contact your insurer. Reach out to your insurance company or insurance agent to find out what they suggest to help ease the effect of a rate hike.
- Look for discounts. Go through your insurer's car insurance discounts to see if you qualify for any of them.
The Bottom Line
A change in your car insurance rate, whether it comes during the policy term or at renewal time, can be good news or bad news. If the news is bad, consider shopping around for new coverage or adjusting your existing coverage, such as raising your deductible, to lower your premium. If you're hunting for new coverage, consider using Experian's free tool for comparing car insurance quotes.