What Causes Your Insurance Premium to Go Up?
You may spend a significant amount of money each month protecting what is most valuable to you, such as your car, home or business, by purchasing different types of insurance. No policyholder wants the unwelcome surprise of suddenly receiving a higher insurance bill in the mail. Understanding common reasons behind insurance premium increases could help you to save money by remedying the issue or switching insurance companies.
How Are Insurance Premiums Calculated?
Insurance premiums are calculated based on the perceived risk associated with insuring the individual or property. Motor vehicle insurance, for example, is calculated using information such as the average number of car accidents in the policyholder’s area and whether the person has been involved in previous accidents.
If perceived risks increase, you may experience a corresponding increase in your insurance premium. The insurance company now views you as a greater risk, with higher odds of the insurer eventually having to pay a claim. To make up for the likelihood of paying for your losses at some point in the future, the insurance company will increase the price of your policy.
New Risks Identified in Insuring You
You may experience an increase in your insurance premium in Arizona when it comes time to renew an existing policy or if something happens that changes your risk level to the insurance company. The insurance company will reassess your situation and calculate your risk potential. If the insurance carrier finds a reason to view you as a higher-risk client, you will experience a subsequent price hike. Examples include:
- An at-fault motor vehicle accident. The price of your automobile coverage in Arizona will most likely increase if you get involved in a car accident, especially if you were found to be at fault. If you get a ticket for dangerous or reckless behaviors, such as a speeding ticket or driving under the influence, this will also lead to higher car insurance costs.
- New property risks. Your homeowners insurance policy may get more expensive if you add something to your property that is viewed as a potential injury risk or attractive nuisance (something dangerous that attracts children by its nature). Examples include installing a swimming pool, buying a trampoline, or getting a dog or exotic pet.
- Higher property value. If you make changes to your home or assets that increase the overall value of what you need insured, your policy will cost more as a result. This is because the insurance company will feasibly have to pay more if your property gets stolen or damaged. Examples include purchasing a new sports car, luxury goods, jewelry, watches or electronics.
- Decreased credit score. A drop in your credit score can be a red flag for an insurance company to view you as a higher-risk client. If your credit score goes down because of missed or late payments, credit inquiries, or increased debt, your insurance company may choose to increase your premium to protect itself.
- Changing environmental hazards. Finally, changes in the environment around you could lead to higher insurance premiums if your property is now viewed as being at a higher risk of damage due to natural disasters, such as an increase in storms, flash floods or wildfires in your area in the last year.
If your insurance premiums have suddenly increased, find out why. Contact your insurance company to inquire about the higher price. An insurance representative should be able to look into your account and let you know the reason for the increase, such as new risks or hazards associated with insuring you. You may have to request quotes from other insurance companies to find out if you qualify for a lower price somewhere else. If you suspect your insurance company of treating you unfairly and increasing your premiums without cause, contact an attorney for assistance.