What makes auto insurance premiums more expensive? Why they go up, and tips for how to save. | Fortune

What makes auto insurance premiums more expensive? Why they go up, and tips for how to save. | Fortune
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November 2, 2022, 5:52 PM UTC
Motor vehicle insurance rates have risen 10.3% over the last year.
Photo illustration by Fortune; Original photo by Getty Images

Owning or leasing a vehicle can be one of the most exciting milestones for many drivers on the road, but it also comes at a cost that goes beyond the sticker price. One of the major costs that could make you slam on your brakes: your auto insurance premium. 

In fact, the most recent Consumer Price Index (CPI) shows that motor vehicle insurance rates have risen 10.3% over the last year. That’s just the cost you’ll be responsible for to insure your vehicle. AAA’s 2021 Your Driving Costs study found that the average cost to own and operate a 2021 model vehicle was $9,666 in 2021 when the vehicle is driven 15,000 miles per year. And the average insurance cost for all vehicles was $1,342.

Your auto insurance premium isn’t set in stone and could be drastically higher or lower than someone else’s premium depending on a number of different factors insurers use to determine the level of risk they take on by extending a policy to you. 

What kinds of factors determine your auto insurance premium? 

Your auto insurance policy is an agreement between you and your insurance provider that states that in exchange for a regular premium, your insurer will cover the cost of any losses you may incur when an accident takes place. Your insurer assumes a certain level of risk when deciding to do business with you, so it’s important to them to vet you and your driving history to determine how much they need to charge you to feel comfortable assuming that risk and cover your losses in the event that you file a claim. 

A few personal stats they’ll evaluate include your…

5 Reasons why your auto insurance premium may increase 

Your auto insurance premium can change for a number of reasons, some of these may be in your control and others may be a result of the environment you’re in. Pinpointing why your premium may have gone up can help you make a game plan for how to reduce it. 

How to save on your auto insurance premium  

So your rate went up and you’re looking for ways to trim your costs. How do you do it? There are a few strategies you can explore. 

The takeaway  

Your auto insurance premium can creep up for a number of reasons that may not always be a result of your own actions. By regularly monitoring your bill, scouring for discounts, practicing positive financial habits, and actively communicating with your provider to learn about ways you can save, you can make sure that your premium doesn’t stretch your budget too thin. 

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