Can Your Car Insurance Rate Change During the Policy Term?

What Can Trigger a Rate Change?

Car insurance rates normally take effect when you renew your policy and not during the policy term. For instance, your rate won't go up during policy term after filing a claim, getting into an accident or racking up a traffic violation. However, your rate will likely change if you adjust your policy.

Here are some actions that may prompt a rate change before a policy term ends.

Adjusting Your Coverage

If you're in the middle of your term and decide to tack, say, optional towing and rental reimbursement coverage onto your policy, that change will likely come at a price—and one you need to pay before your term ends. By bulking up your coverage, you might see a rise in your car insurance rate take effect right away.

A boost in your car insurance rate could also happen if you bump up the dollar limits for bodily injury liability and property damage liability coverage before your policy term ends.

Insurers generally let you make changes to your coverage before a policy term expires, and these changes normally take effect right away.

Changing Your Deductible

When looking for ways to reduce your monthly expenses, you may realize you might save money by increasing your insurance deductible. A deductible represents the amount of money that's subtracted from a car insurance claim before you receive a payout. So if you file a claim for a car repair costing $2,000 and your deductible is $500, the insurance company will pay $1,500 if it approves your claim.

Typically, raising your car insurance deductible from, say, $500 to $1,000 should drop your rate. But if you reduce the deductible from $1,000 to $500, your rate likely will go up. These changes can increase or decrease your rate during the policy term.

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 second vehicle, your rate almost certainly will increase.

Moving to a New Place

Let's say you decide to relocate from one side of town to the other. It might not seem like a big deal in terms of car insurance rates, but it could be. Simply moving from one ZIP code to another can affect your car insurance rate.

For instance, you may have relocated from a lower-crime ZIP code with few car thefts to a higher-crime ZIP code with more car thefts. As a result, your rate may increase because living in the new ZIP code raises the odds of filing a car insurance claim. The amount of traffic, number of accidents and population density in your new ZIP code also could cause your car insurance rate to 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?

State laws regulate how car insurance companies inform policyholders about rate changes. For example:

• In Texas, if an insurance premium is going up by more than $10 or 10% of the previous month's amount, the insurer must send a 30-day notice before the increase takes effect.
• In California, if a policy has been in effect for more than 60 days, the insurer must send a written notice to a policyholder at least 30 days before a rate hike kicks in.

Most often, insurers alert policyholders to rate changes shortly before it's time for a policy to be renewed. Your rate might increase in your next term if, for example, you filed a claim during the policy period, received a speeding ticket or got into a car crash.

What to Do About Rising 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 by:

• Shopping for a better rate: It's generally recommended that you seek car insurance quotes from at least three companies when you're searching for a better rate.
• Dropping coverage: If you're driving an older car that's paid off, consider getting rid of comprehensive and collision coverage.
• Increasing your deductible: If you raise your deductible from, say, $500 to $1,000, your premium might go down. Just remember that if you bump up your deductible, you'll be on the hook for higher out-of-pocket costs when you file a claim.
• Switching to pay-per-mile coverage: Don't get behind the wheel of your car all that often? If so, you might look into pay-per-mile coverage, which may be cheaper than traditional coverage.
• Contacting 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.
• Exploring discounts: Make sure you're receiving all the car insurance discounts you qualify for, such as good driver and safe car discounts.

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.