Understanding What Makes Insurance Rates Climb

Because the driver of a motor vehicle become keenly aware of increases in the price of fuel, both drivers and car owners, seek a reasonable explanation for any increase in the rate attached to an insurance premium. The factors that determine the original rate play a part in influencing the possible need for rate increases.

What factors get studied by insurance companies, when they seek to set the rates for premiums?

• The address of the policy holder
• The amount of driving done each day by the policy holder
• The types of coverage selected by the policy holder
• The policy holder’s age
• Any history of former accidents each of which involved a vehicle driven by the policy holder.
• What history indicates, regarding policy holder’s chances for becoming involved in another accident.

The challenge facing each auto insurance company

It must find a way to cover the cost of repairing a damaged vehicle, even if the driver of that same vehicle did not cause the car-damaging collision.

The company could obtain that money by increasing the rates for all premiums, even those for policies that were purchased by every single one of the company’s customers. Alternately, it could elect to raise the rates on just those drivers that had become involved in an accident, regardless of whether or not they had been named at-fault.

That challenge presents the greatest problem for insurance companies in states that have a no-fault policy. There, the insurance companies are required to cover the costs created by any accident, even if the driver-at-fault did not have any form of insurance.

Options available to driver that faces the prospect of a higher premium

• Study the coverage options available to policy holders.
• Consider possible changes in coverage.
• Learn the prices charged by other insurance companies.
• Think about buying a policy from a different insurer.

Options denied, and those given to an insurance company

Injury Lawyer in Sudbury knows that no insurer can raise the premium rates for a policy holder without first offering notice of plans to increase the current rate. An insurance company could be charged with bad faith, if it undertook such an action.

An insurance company can offer rewards to drivers that manage to maintain an accident-free record. The company can remind someone that has been involved in an accident, but has no previous record of such involvement, of a potential increase in the rate for the policy’s premium, if the next incident gets reported within a given period of time, typically 6 months.

If that warned driver does not have an accident in the next 6 months, he or she gets rewarded with an unchanged rate. If the same driver does have a collision, then the driver’s premium will increase.