It can be so frustrating to open your insurance bill to pay your premium, only to learn that your premium payments have increased on renewal. Unfortunately, rising insurance premium costs are a reality that cannot be avoided in the world of personal and business insurance.
Still, trying to understand the reasons your bill went up can be complicated. It can also involve a lot of guesswork if you are not familiar with reading and understanding insurance documents. We know that most people who carry insurance policies on their homes, cars, and businesses don’t have specialized knowledge of how insurance policies are created and adjusted. It is up to the insurance company to make those changes more transparent and understandable.
Because Thrive provides personalized insurance solutions, we take the time and care to help our customers understand how policies work and what goes into changing premiums. While we provide various types of insurance, this article is focused on personal policies, including these essential insurance options: home, auto, motorcycle, and life. We are excluding business and health insurance.
What causes home insurance premiums to go up?
The Nest identifies four major reasons for home insurance premium increases (aside from the typical increases for inflation):
- new risks
- a decrease in credit score
- natural disasters
Each of these things can potentially increase your premium. Liability claims tend to have the biggest impact because it means your insurance company becomes aware of a new risk factor related to insuring you and your home.
Another type of claim that affects your premium is theft or vandalism, especially if you are the victim of this kind of crime more than once. This means your home is more expensive to insure, and so your premium will go up to cover the risk.
New risks include anything that you add to the home that creates additional damage or liability possibilities. Some common risks we see are installing a pool, trampoline, or fireplace. Even something like getting a dog could play a part here. Certain breeds are considered higher risk, and exotic animals are also an issue for insurers.
If your credit score goes down due to increased debt, decreased income, missed or late payments, too many credit inquiries, or some other reason, your insurance company may choose to increase your premiums to protect themselves.
And finally, natural disasters can cause insurance premiums to rise for homeowners who have made claims related to those disasters, but also unaffected homeowners in the at-risk area. Even those outside of at-risk areas could see a premium increase if it is a particularly hard year.
Other things that could affect your premium include: having a home business with equipment or inventories in your home, buying or receiving luxury goods, and being in a neighborhood where there are a lot of claims being made against a home in insurance policies.
What causes auto and motorcycle insurance premiums to go up?
The easiest way to understand the increasing car insurance rates and motorcycle premiums is to see the insurer’s perspective that the more risk you and your car pose, the higher your premium is going to be.
The question, then, is what causes an insurer to perceive you to be more or less risky?
Here are things that insurers consider higher risk behaviors that could lead to an increase in your car or motorcycle premium:
- Getting a speeding ticket.
- Being involved in a car accident, especially if you were at fault.
- Being arrested for a motor vehicle offense, such as a DUI/DWI or reckless driving.
- Multiple comprehensive claims in a limited time frame.
- Being a teenage driver or a driver over the age of 70.
- Having a lapse in insurance coverage.
- A drop in your credit score.
- Moving from one state to another.
- Financing a new car.
There are also risks that are not specifically related to your behaviors or characteristics. There are some things that are outside of your control but could still affect your premium, including: rising repair costs, an increase in distracted drivers on the road, more drivers on the road, higher speed limits in your geographic area, and an increase in uninsured drivers.
What causes life insurance premiums to go up?
There are fewer situations in which a person might see their life insurance rates increase, primarily because life insurance is not calculated the same way as other policies.
Many policyholders purchase level-premium policies, which guarantee the same premium for the length of the term.
The term length is typically 10, 20, or 30 years long. Once you reach the end of that term, you will likely see an increase in your premium. The coverage also increases over time, in contrast to decreasing term insurance. However, decreasing term policies still generally have the same premium throughout the length of the plan.
Insurance premium rates are decided some of the following factors:
- Age at the time of purchase
- Personal and family health history
- History of smoking
- Higher vs. lower risk occupations
- Policy coverage
- Amount of coverage
At Thrive Insurance, we like to keep things simple. We only offer term insurance that stays the premium through the life of the policy. Many of those policies are able to convert to a permanent policy based up the health grading they received when they first got the policy.
The only premium difference is based on age. Naturally, users have to convert the policy before a certain age, which is generally around age 65.
What should you do when your insurance premiums go up?
When your insurance premiums increase, it can be surprising, confusing, and discouraging. We understand those frustrations, and we think your insurance company should be able to explain to you what factors are influencing your insurance costs.
Some companies want to give you the very cheapest insurance quote, without considering what coverage you actually need.
Thrive Insurance is going to do everything we can to make sure that when life’s unexpected events happen, you have the coverage you need to protect you.
Our outstanding customer service is what sets us apart from our competitors, and part of that customer service is helping all of our clients/customers to understand their existing policies and any changes that need to be made.
If you are already a client of ours, thank you! Please contact us if you have any questions about your premiums or coverage. And if you are shopping for new insurance, perhaps because you’re under- or over-insured, check us out. Let our team show you what real customer service can look like in the world of personal insurance.