Should Auto Insurance Go Up or Down Every Year?

Certain motorists may find that their car insurance premiums have been consistently decreasing, leading to the enjoyment of low rates. Conversely, others may observe the opposite trend, with their premiums steadily increasing and showing no signs of stopping. Interestingly, these fluctuations can occur even without any changes in the driver’s details or records. The trend’s direction, whether it is upward or downward, is heavily influenced by age, the natural progression of life, and anticipated improvements or deterioration, which will be detailed further below:

When you buy your first automobile insurance policy, anticipate higher rates due to your limited insurance history and potentially being a young driver with limited experience. Nevertheless, as you maintain a clean driving record, you can gradually enjoy lower premiums. This decrease often results from qualifying for additional discounts based on your driving and insurance history, loyalty to the company, improved credit scores, and the natural progression of becoming a more experienced driver with each passing year.

On the flip side, it’s possible that you have exhausted all the available discounts from your vehicle insurance company. Then, you start seeing the effects of external factors like inflation more clearly, resulting in a gradual increase in your insurance rates. Additionally, if you are over a certain age, you might notice your rates rising as well, especially after the age of 70 with most insurance providers.

For example, when you purchased your first policy at the age of 18, probably you started with a relatively high premium. However, over the next decade, you might observe a gradual decrease in your car insurance costs, provided you maintain a clean driving record. Conversely, once you pass the age of 70, you may notice a continuous upward trend in your premiums, even if you have a long history of safe driving. During other stages in your driving life, your rates will largely be influenced by your driving history, credit score, choice of vehicle and the effectiveness of your shopping efforts during each renewal.

It is worth noting that the trend in your rates may be similar across different auto insurers. For example, if your premiums started high as a teenage driver and decreased over time due to age and a clean record, this progression would likely occur with most insurance companies.

In summary, your position in the circle of life and your progress in your motoring journey can significantly impact whether your car insurance rates decrease for a period or begin to rise after a certain point.

In addition, motorists may feel that their vehicle insurance costs should come down every year because the value of their vehicle is coming down. However, it is worth noting that the value of your car mainly affects Collision and Comprehensive coverage costs and doesn’t affect the liability portion of a policy. Furthermore, repair costs may not be much different between an old and new vehicle. The only difference may be when the vehicle is totalled as the insurer would pay lower actual cash value with an older vehicle.

In other words, the fact that the value of your automobile is going down fast over the years may not really have the desired effect of a downward trend on car insurance costs. That is why it is important to consider dropping Collision and Comprehensive coverage to save money when the value of your car has dropped sufficiently and you now can pay for repairs or replacement out of pocket.

Motorists may experience persistent premium increases or decreases due to factors beyond their control. External factors that can cause auto insurance rates to go up include inflation, increased risk in specific regions, rising vehicle repair costs, and the impact of catastrophic events like natural disasters or large-scale accidents.

It is highly likely that there will be more reasons for the vehicle insurance premiums to trend up. Over time, prices typically rise, and insurers are adept at passing these cost increases to policyholders, though they might be slow or reluctant to pass on cost savings to customers.

However, certain external factors have the potential to lower auto insurance rates, such as presence of highly competitive insurance market, periods of reduced risk like during the COVID-19 pandemic with less driving, and periods of disinflation where general prices are falling.

It is essential to recognize that the car insurance industry is influenced by a combination of these factors, and each insurance company has its own policies and risk assessments. To secure the best insurance rate, it’s advisable to shop around, compare different companies, and consider factors such as coverage options, deductibles, and available discounts.

It is important to remember that auto insurance premiums are highly sensitive to changes in your circumstances. Any alterations to your address, drivers on your policy, insured vehicles, credit score, accidents, tickets, or claims can affect your premiums significantly. For instance, moving to a state with lower rates can result in substantial premium reductions.