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Your car insurance rate is set each time you renew your policy, and for reasons that may or may not be in your control, you may see a big increase for your next policy period. According to Insurify, car insurance costs across the nation are expected to increase by 22% in 2024, with some states seeing hikes upwards of 50%.
Understanding why your car insurance premiums have gone up can help you get a sense of what you can do to save in the future. Here's what you need to know.
Reasons Why Your Car Insurance Went Up
In short, the reason your car insurance premium went up is due to increased risk for the insurance company. However, it may not necessarily be your fault. Here are some potential reasons to consider if you see a price hike with your new policy period.
Accidents
Whether or not you're at fault in a collision with another vehicle or object, insurance companies view accidents on your driving record as an indicator of risk. Keep in mind, though, that some states may not allow insurers to hike prices for collisions that aren't your doing.
Learn more >> How Long Does an Accident Stay on Your Insurance?
Claims
The purpose of car insurance is to provide financial protection in the event that you need to file a claim. However, doing so may result in a higher premium, even if it's for damage that you didn't cause—though some states don't allow this.
Adding a New Driver
Adding another driver to your policy may increase your premium, especially if they have a poor driving record or they're statistically at greater risk of filing a claim. In particular, teenagers tend to be the most expensive drivers to insure as they have the highest crash rates compared to drivers ages 20 to 69, according to the Insurance Institute for Highway Safety (IIHS). Seniors over the age of 70 also have increased crash rates compared to drivers ages 20 to 69.
Increasing Your Mileage
The more time you spend on the road, the greater the chance that you'll be involved in an accident. So, if you switch from working at home to commuting to an office or you increase your expected annual mileage for other reasons, your insurance carrier may increase your premiums to account for the added risk.
Learn more >> How Does Mileage Affect Car Insurance?
Buying a New Car
The cost of repairing or replacing your car in the event of an accident, vandalism or theft ultimately depends on the value of the vehicle. What's more, some models are more likely to be stolen than others.
As a result, if you buy a more expensive vehicle or your new car may be a larger target for thieves, your premiums may increase.
Moving or Changes to Your Neighborhood
Moving to a new ZIP code could impact your car insurance rate even before it's time to renew. That's because certain ZIP codes have more claims than others; for example, you can generally expect to pay a higher premium if you live in an urban area compared to a rural area.
Even if you don't move, insurers may hike your premium if insurance claims in your ZIP code have increased recently due to weather-related events, increased theft or vandalism or other perils.
Loss of Discounts
Car insurance companies offer a variety of discounts to help reduce the cost of your policy. Some of these discounts may be based on your driving record, student status, homeowner status or bundling of multiple policies with the same insurer. You may have even received a discount as a new customer.
If you no longer qualify for a discount, your policy will naturally become more expensive.
Learn more >> Top Car Insurance Discounts
Increase in Repair Costs
Inflation impacts the cost of many different products and services, including car repair costs. Repair costs are also impacted by the increased complexity of new vehicles that cost more to fix. Insurance companies typically hike premiums to account for these increases.
Lapse in Coverage
If you've allowed your auto insurance policy to lapse and it's been long enough that you can't reinstate it—or you didn't have coverage for a while for other reasons—your new policy will likely be more expensive.
Moving Violations
If you've been ticketed for speeding or another moving violation, you're statistically more likely to file a claim compared to someone with a clean driving record. The more violations you rack up, the greater risk you pose to the insurer. Driving under the influence can be particularly damaging, and you may need to obtain an SR-22, which can be incredibly expensive.
How to Lower Car Insurance Costs
Here are some ways you can lower your car insurance costs:
- Shop around. Just because your insurance company increased your rate doesn't mean others will charge you more. Experian can help you compare car insurance quotes from top insurers to ensure you're getting the best deal possible.
- Raise your deductible. With collision and comprehensive coverage, you have the option to set your deductible, which is the amount you pay out of pocket in the event of a claim. If you can afford to shell out a little more cash in that instance, raising your deductible could help reduce your premium.
- Reduce your coverage. If you have optional coverages, such as rental car reimbursement or roadside assistance, dropping them can help you save. Additionally, cutting your liability coverage could reduce your costs, though it's important to consider the consequences of less coverage in the event that you cause an accident. Finally, if you own your car free and clear, you may consider dropping collision and comprehensive coverage if you can afford to repair or replace your vehicle on your own.
- Look for more discounts. It's possible that you're not taking advantage of all of the discounts available to you. Search your insurer's website or reach out to an agent to learn more about which discounts you may qualify for so you can maximize your savings. Common discounts include good driver, multi-car, low mileage and defensive driving.
- Bundle home and auto insurance policies. Many insurers will offer a discount for bundling multiple policies, like home and auto insurance. If you currently use different insurers for each policy, consider switching one so you can receive a discount for bundling home and auto.
- Improve your credit. In most states, auto insurers use a credit-based insurance score to help calculate your rate. While a poor credit score typically won't result in a premium hike on its own, it can compound other negative marks. Working on building your credit can help ensure you always get the best rate possible.
Learn more >> Factors That Affect Your Car Insurance Costs
Car Insurance Trends to Expect in 2025
There's no crystal ball we can use to say exactly what will happen with car insurance rates in the coming year. However, some factors, including vehicle prices and inflation, are starting to stabilize.
Additionally, 80% of drivers have indicated that they've made safety-related changes to their driving as a result of telematics technology, according to the Insurance Information Institute. Still, it can take time for these improvements to result in flatter insurance premium increases, and some experts still anticipate a single-digit increase in 2025.
Learn more >> How Drivers Are Managing Auto Insurance Premium Increases
The Bottom Line
There are several reasons why auto insurance premiums increase over time, and while you can't control all of them, there are some steps you can take to minimize their impact on your wallet.
As you consider your car insurance policy, make sure you understand how car insurance works, maintain the right amount of coverage and avoid common mistakes committed by other drivers.