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Understanding the roller-coaster that is car insurance premiums

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Understanding the roller-coaster that is car insurance premiums.png

One of the more frustrating realities for vehicle owners, outside of costly repairs, is learning that their insurance premiums will be rising by a not insubstantial amount. Conversely, one of the most satisfying moments for vehicle owners, outside of learning that they won't need those costly repairs, is learning that their insurance premiums will be dropping to a considerable degree.

While it often seems like these premium hikes and falls occur for seemingly no apparent reason, it's important to understand that insurers never act without careful deliberation and without a reason. Indeed, a large part of the reason why a policyholder may see their premiums change so drastically is the occurrence of so-called life milestones that, in the eyes of these companies, make them more or less insurable.

Indeed, experts indicate that some of the life milestones that might affect car insurance premiums include:

  • Higher education: While everyone knows you'll pay more for car insurance as a young adult owing to inexperience, some degree of savings will likely be realized once you mature, and earn a college degree or even an advanced degree.
  • Getting married: Statistics show that more people are putting off marriage until later in life, which can prove to be advantageous when it comes to car insurance. That's because insurers already charge people in their 30s less owing to their presumable experience behind the wheel, and getting married typically drives rates even lower.
  • Buying a home and trading vehicle types: For many newly married couples, the logical progression is to buy a home and start a family. While bundling homeowners' insurance with car insurance can save money, so too can having a child, as it might result in you trading up to a vehicle that's viewed as safer (i.e., cheaper) to insure, such as a minivan.
  • Midlife crisis: It's fairly common for older people to treat themselves to a more luxurious or sporty vehicle as they age. While there's nothing wrong with rewarding yourself for hard work, realize that fancier and/or faster vehicles typically mean higher premiums.
  • Retirement: As much as people want to deny it, their driving abilities do decline as they age and, as a result of the increased accident-risk that accompanies this decline, retirees might find themselves paying higher premiums.

Have you noticed your insurance premiums rising after other life milestones? If so, what were they and how much did they increase?

Source: Consumer Reports, "Milestones that can change your car insurance rates, for better or worse," Tobie Stanger, Jan. 31, 2017

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