IN PLAIN ENGLISH

Surprising reasons car insurance rates could go up

It's well-known that adding a teen driver to your policy or getting into a car crash will raise your premium. But if you’re not well-versed in car insurance rating factors, you might not be aware of some of the other contributing factors to rate hikes. We’ve compiled a list of five coverage blunders detrimental to your wallet’s well-being — and a few ways to avoid them.


1. Keeping your insurance at state-minimum levels

This is a common mistake. No one wants to spend more on car insurance than required. However, having a history of maintaining state minimum coverage — and no more — can cost you in a few ways. If you plan to get full coverage auto insurance in the future, a history of state-minimum coverage may cause your premiums to be higher than those of a driver who has maintained higher levels of prior coverage. A driver with state-minimum coverage in the past will pay $52 more for their next full-coverage policy than will a driver with a history of higher limits.

 

chart of insurance history


Car insurance companies see drivers with low levels of coverage as riskier than drivers with histories of high coverage levels. While you can save money in the short-term by sticking to state-minimum coverage, it could cost you in the long run. The next reason to be wary of state minimum coverage is the possibility of exhausting your minimum coverage in an accident. If you live in California and carry only state-minimum insurance coverage, you only have $5,000 of property damage liability. If you total another driver’s brand new Ford F150 (MSRP starting at $28,155), you can be on the hook for the remaining $23,155.


2. Focusing on discounts

When shopping for car insurance, look at the bottom line: are you getting the best coverage for the best price? Discounts are great, but companies often offer them to make it seem like you’re saving a lot of money on your policy. In reality, the company's quote could be significantly more expensive than that of a competing company. If you want to find maximum savings, look past discounts and assess the overall policy costs.


3. Failing to maintain coverage

If you are shopping around for car insurance, make sure you avoid a lapse in coverage. Insurance providers see a lapse in coverage as a major indicator of risk. In the eyes of an insurance company, an uninsured driver may have been driving while uninsured. A lacking insurance history can disqualify you from a policy with certain companies and make you ineligible for some discounts. If you are going to switch insurance providers, make sure your new policy begins the same day you cancel your old one. Going even one day without insurance can hurt you.


4. Not bundling

You should have as many insurable interests as possible covered by a single company. If you own a home, rent an apartment, have an umbrella policy, or even insure an ATV, make sure these policies are with the same company as your car insurance policy. You can save hundreds of dollars by bundling multiple insurable interests with one company. Plus, it's a great way to reduce the number of insurance companies you have to deal with.

chart of bundle status


5. Automatically Renewing Your Existing Policy

Complacency can cost you. According to a J.D. Power study, staying with your current provider for several years can cost up to an additional $300 per policy period. Older policies are likely to have acquired additional annual premium increases and are more likely to face rate hikes due to price optimization.

Even if you don’t want to switch carriers, obtaining lower quotes from competitors can provide an incentive for your current insurer to offer a price cut. When your renewal time nears, experts agree you should compare a number of quotes to find the best deal. Click here to compare car insurance rates from local and national insurance providers in the US to see if you can find a better deal elsewhere.

 


 

This article was written by one of The Zebra’s resident insurance experts. Each article is thoroughly researched to ensure we provide readers the most accurate — and helpful! — information possible. That’s insurance in black and white.®

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Recent Questions:

Will carriers see other car insurance policies in my name?

It's likely that your car insurance company will see if you have car insurance with another company. Most carriers run reports for discount purposes to see if you are already insured.

Can my husband add a car that is in my name to his insurance policy?

Thanks for your question. Your husband should be able to add your vehicle so long as his insurance carrier is alright with the change.

Are 911 dispatchers eligible for insurance discounts as first responders?

Every insurance company has different guidelines and available discounts, so it's hard to give a blanket statement about your eligibility. That said, The Zebra can quote you with several companies at once, giving you the chance to compare the best rates available.

Can I pay for all my insurance policies at once?

Each policy would be separate. They would take out a different payment for each policy.