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Does your car insurance drop after a year?

Important facts to know...
  • Some people wonder if their car insurance will decrease after the first year
  • Insurance is not a “fixed expense” though the average you will pay may be the same for some time
  • Factors such as the insurance market, number of claims, and financial solidity of a company all influence rates
  • Your driving record is the single most important factor that you can control that influences your rates

When people sign up for new car insurance, one question they sometimes have is whether their insurance rates will ever change?

Many drivers think that their insurance premiums should come down after one year. When they do not see this change, they wonder if there is something wrong or if they should contact their insurance company.

It’s important to note that car insurance does not typically drop after a year. It may fluctuate somewhat due to a decrease or increase in premiums. But this is not a consistent rule. Whether your premium changes or fluctuates is determined by some factors:

  • Changes in your driving record – If you have experienced any change in your driving record or receive moving violations during the year, you can expect your premiums to go up rather than down. Your driving record is the single most important factor in predicting your premiums rates.
  • Changes in the insurance market for your class of insurance – If the insurance costs change due to market changes or company financial strength, you will see your premiums change accordingly.  The more claims they have in a given year, the more likely everyone’s premiums will go up slightly.
  • Change in age or demographics – If your age or other demographic factors change, you may see an increase (or a decrease) in your premiums, depending on what the changes are. For example, if you turned 26 during the year and you were paying at the rate of 18-25-year-olds, you should see a decrease the following year due to your age.
  • Insurance add-ons or modifications to your vehicle – If you make any changes to your policy or add any modifications to your vehicle, you may see an increase in your premiums the following year. Certain modifications cost you more due to the increased risk and adding insurance usually increases your monthly premium.
  • Purchasing a new (or older) car – If you purchase a new car it can increase your premiums, depending on the age of the vehicle. Older cars tend to lower your premium rates. But certain sports cars or others can increase it even if they are older models.

As you can see, many factors influence the cost of your car insurance. There are too many factors to list them all in this article but suffice it to know that insurance if not a “fixed expense.”

While the rate that you pay today may be the same next month and through a given premium period, insurance of any kind is subject to change due to the subtle fluctuations of the market and your status changes.

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How to Monitor Your Insurance Costs

Keeping an eye on your expenses is important. If you want to see what your premium might be next year and compare it to what you have this year, ask your insurance representative that you currently have to give you an idea of what it might be.

You can then discuss your policy and see if there is anything you need to change to get more value for your money. Remember that insurance is not about how much you spend but how much value you are getting for your cost on a month-by-month basis.

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Factors that You Can Control

The most important thing to do when it comes to monitoring and controlling your insurance costs is to keep your driving record in excellent shape, see if you qualify for any discounts on your insurance premiums, and shop around to compare prices.

Other factors you have control over include the type of insurance you sign up for and how much coverage you choose.

Of course, less coverage will cost less, but you should also consider the risk level that you have when making this decision.

Remember, it is not a good value if you have a lot of risks but you are paying a very small premium. This means that you may not get your claim paid in full if you have minimum insurance with a higher risk.

Remember that if you make any vehicle modifications, it is your responsibility to ensure that they follow the law and do not violate any state regulations.

If you modify your car with unlawful add-ons, you may end up paying a fine, and your insurance premiums could increase as a result.

Assessing Your Risk Level

The greater your risk, the more you should increase your coverage to cover the unpredictable events that you have no control over.

By controlling your coverage amounts at the front end, you will be able to have more control over your potential risk and financial loss that you could experience if you do not carry enough insurance.

Insurance is something you hope you never need, but you cannot do without it. So balance your personal risk with the amount you can afford and contact an insurance representative to help you choose the best one for you.

Shop and Compare to Find the Best Deal

To get the best deal on your premiums and know that you are getting the best value for your money, you should compare several policies and companies. Look at the rates that you are paying now and see if you can get a better deal for your money.

Consider the risk that you take when you drive and the number of miles that you drive on a yearly basis.

All of these factors are factors that you can control by shopping for a better deal and getting a free quote. By doing your homework now, you can save money down the road and know that you are covered for life’s unexpected situations.

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