What’s the Best Way to Handle an Auto Insurance Rate Increase?

When your insurance premium increases, it’s helpful to understand why because the reason may inform your next steps. Sometimes, your rate increase will make sense immediately. But other times, you may be unsure of the reason.

If that’s the case, you can ask your insurance company for an explanation or breakdown of the price increase to make sure you have the necessary information. Here are some common reasons why your rate may have increased:

• You updated your policy. Changing your policy will affect your premium, which may increase or decrease depending on the updates you make. Changes that cause your rates to rise include increasing your liability limits, adding more coverage types to your policy, and decreasing your deductibles if you have full coverage.
• You moved. Your location affects your car insurance premium, so if you moved, your rate may increase. Urban areas, for example, tend to have higher average rates than rural areas do.
• You recently committed a moving violation. Maintaining a clean driving record will help to keep your rates low. But if you recently committed a violation, such as speeding or a DUI, you should expect your rate to increase at your next renewal.
• You filed a claim. If you filed an auto insurance claim since your last renewal, your premium will likely increase, regardless of whether the damage was your fault. The unfortunate reality of insurance is that filing a claim makes you riskier to insure in the eyes of insurance companies, so more often than not, they will charge you more going forward. Learn more about auto insurance claims that increase rates.
• You added a teen driver. If you have just added a teen driver to your auto insurance policy, your rate will increase — likely significantly. Statistically, teens are the riskiest age group to insure, so they are charged the highest average rates.
• Your insurer increased base rates. Although many rate increases result from the policyholder’s action, that’s not always the case. Insurance companies regularly increase rates across the board, especially recently. These increases are due to factors outside policyholders’ control.

If you’ve been satisfied with your current insurer and would like to explore options to lower your rate without switching providers, the first step is to review your policy. Go over everything you’re currently paying for, including your liability limits and add-on coverages, and check your deductible amounts if applicable.

Consider whether everything still fits your needs or whether you can make any adjustments that could save you money. For example, if you have an older vehicle, it may be worth it to drop collision and comprehensive coverage. Although we don’t recommend minimum liability coverage, if your liability limits are currently on the high end, you may consider lowering them if you feel it provides sufficient coverage for you.

Ideally, when you purchase a policy, your insurer will check for and apply any auto insurance discounts you may be eligible for. However, it’s always a good idea to check if there are any that may have been missed. You also may qualify for a discount that you were not eligible for when you first got your policy. For example, if you had a violation several years ago but haven’t had any since, you might qualify for a good-driver discount now.

In addition, if you recently added a teen driver to your car insurance policy, ask about car insurance discounts for teens, such as those for good students. Some companies, like State Farm, also have specific discount programs and opportunities for young drivers; State Farm’s is a telematics program called Steer Clear.

Call your insurer and ask to speak to an agent, who can help you figure out which discounts you’re eligible for and apply them to your policy. If you’re with a digital-first insurance company, like Lemonade, you can email them to get in touch with an agent.

Consider Signing Up for Usage-Based Insurance

Most auto insurance companies offer usage-based insurance, also called a telematics program, to help customers save on their premiums. Usage-based insurance tracks your driving habits, including how safely you drive, and provides a discount at your next renewal based on the driving score it calculates for you.

If you’re not enrolled in your insurer’s telematics program, it’s worth looking into it. However, keep in mind that some companies will increase your rates if you drive unsafely.

If you drive less than average, you may benefit from pay-per-mile auto insurance, like Nationwide’s SmartMiles. Although some telematics programs consider how much you drive, a pay-per-mile policy will likely save you more because the premium is structured around your monthly mileage.

It’s a good best practice to shop around regularly for insurance to see if another company can offer you a lower rate, even if you don’t have an obvious reason to. However, it’s a particularly good idea to shop around after a rate increase.

That said, it’s important to weigh factors beyond cost. For example, if the cheaper company has poor customer service ratings and you’ve been a happy and loyal customer of your current insurer for many years, that should factor into your decision.

To compare rates accurately, make sure to get quotes for the same coverage you’d be getting if you stayed with your current insurer. If you find everything you need for a price you’re happy with from a different company, it’s a great time to switch your auto insurance.

Cheapest Car Insurance Companies

The following companies are some of our top picks for cheap auto insurance:

If your rate increase was due to a recent violation, it’s worth getting quotes from the best companies for higher-risk drivers. Each insurer weighs risk differently, so it’s worth shopping around. For example, Progressive has some of the cheapest average rates for drivers with a DUI, but above-average rates after a speeding ticket or at-fault accident.

For reference, the following insurers have the cheapest average premiums after certain violations, so they may offer you a better deal if you’re looking to switch:

Unfortunately, rate increases are an inevitable part of having auto insurance. The best course of action following a rate increase depends on the reason for the increase as well as your priorities. If you don’t know why your rate went up and it’s a significant increase, it’s best to contact your insurer for more information.

Following a rate increase, even if it was expected, it makes sense to review your policy to see if you can bring down your premium and shop around with other car insurance companies. You may find that another insurer offers you a much better rate for the same coverage. If your increase is due to a violation, it’s worth getting quotes from companies that tend to offer competitive rates for drivers with certain violations, like Progressive.

However, sometimes rate increases are out of your control, and you may not end up getting a better rate anywhere else. You should still keep shopping around regularly, as that could change, and avoid violations to keep your rate as low as possible.