5 Key Reasons Why Your Car Insurance Premium Increases Every Year

Having a car insurance policy is essential as it provides financial aid to the car owner in case of any damage due to accidents, theft, etc. However, the fact that many car insurance holders have to pay increased premium rates every year often causes concern. Let’s understand in detail why the premium of car insurance increases and what factors lead to this increase.

Why Does Your Car Insurance Premium Increase Every Year?

Car insurance premiums can sometimes feel like an unpredictable expense, fluctuating from year to year. Many policyholders are surprised when they notice an increase in their premiums, despite having a clean driving record. The primary reasons for these increases often include inflation, rising costs of repairs and medical expenses, changes in insurance regulations, and shifts in the insured risk profile. Understanding these underlying factors can help you manage your car insurance costs more effectively. 

Factors Considered To Increase Car Insurance Premium

Whenever your car insurance premium rates are increased, certain factors are considered by the insurance provider. Though there can be multiple reasons depending upon your policy and the terms of your policy provider, the five key reasons are: 

Your Claim History

Your insurance claim history is one of the most significant factors that affects your premium cost. If you have claimed your insurance amount in the past, be it for any reason including accident, theft, or vandalism, your insurance provider may view you as a higher risk. The more claims you have on record, the higher the likelihood of an increase in your insurance costs.

Modifications To Your Car

Any modifications or customisations to your vehicle can also lead to a higher premium. Upgrades like installing a high-end sound system, modifying the engine for better performance, or even aesthetic changes like custom paint jobs can increase the value of your car. Insurers may raise your premium to cover the additional risk associated with these modifications, as they could lead to more expensive repairs or replacements in case of an accident.

Geographical Location

Your geographical location plays a crucial role in determining your car insurance premium. Areas with high traffic density, high crime rates, or a high incidence of accidents are considered to be at higher risk. If you've moved to a new location or if crime and accident rates have increased in your area, your insurance premium may go up accordingly.

Insurance Industry Trends

Your car insurance premium can also be affected by industry trends. For instance, an increase in the number of claims filed or a surge in fraud cases can affect overall insurance costs. Insurance providers may raise premiums to maintain their profitability and financial stability.

Inflation and Rising Costs

The general increase in the cost of living, including repair and medical costs, can also cause premiums to rise. As the cost of vehicle parts, labour, and healthcare services increases, insurers adjust their rates to cover these higher expenses.

Apart from these factors, some of the other factors that may lead to increased insurance premiums are the usage of your car and changing the driver in the policy. If your car usage is higher, then your policy provider may consider you a high-risk customer and charge a higher premium rate. Also, if you change the driver in your policy, then your insurer may check the driving history of that person and accordingly fix the premium rate. Therefore, it is always advised to maintain a good driving habit so that it helps you manage your insurance costs.

Take Away

You should understand the reasons behind the increasing premium rates of your car insurance policy, as this helps you manage them effectively. For instance, some of the factors like inflation and government regulations are not in your control, but keeping your car in a well-maintained state, opting for good driving habits, etc. can be managed, and this can help you control the rising rates of your premium. Before you renew your policy, always check the details thoroughly because this will also help you make an informed decision and significantly reduce your costs.

If you have more queries regarding your car insurance policy, you can reach out to us at +91-7551196989 or you can email us at support@insurancedekho.com