August 5, 2011

Three Reasons Auto Insurance Rate Increases May Be Coming

No driver likes to hear about rate increases, but knowing how the insurance market is changing can always give drivers more control over their policies. In the last several years, the average auto insurance quote has been fairly low, but there are a few signs that hefty increases may be coming. There are a few major reasons for this, and by understanding them, it's easier to take the appropriate actions to keep a low-cost, protective auto insurance policy.

It's no secret that the United States economy is in trouble, and in most cases, a recession can lead to serious insurance rate increases across the board. This is particularly true for car insurance, because auto insurance companies borrow money from banks in order to offer new policies. When banks can't lend much money, rate increases are a given, as car insurance companies have to be more selective. Low-risk drivers stand the best chance of avoiding rate increases, but all drivers are usually affected by tough economic times. New policy holders can avoid some of these rate increases by shopping for a policy online and by taking advantage of insurance discount programs.

Another reason for rate increases is the growing number of new driving laws being introduced across the country. Distracted driver laws, which outlaw operating a vehicle while engaging in distracting activities like texting and eating, will inevitably result in more traffic tickets, at least for the first few years that they're enforced. Car insurance companies use driver records to determine the chances of a future claim, so when there are more infractions on driver records throughout the United States, the average auto insurance quote will rise. Drivers can easily avoid these types of rate increases by avoiding traffic tickets, of course, so knowing the driving laws in a state before operating a vehicle is extremely important.

New auto insurance laws may also increase rates. Auto insurance laws control the ways that car insurance companies decide and pay out on claims, so they can certainly have an impact. Some states have limited the types of discounts that insurers can offer to avoid potentially discriminatory pricing strategies. Maximum coverage limits can also be set by state law, and in states with high limits, auto insurance quotes can be extremely high. Some states have fought against potential rate increases my limiting coverage and by easing restrictions on insurers. New Jersey lawmakers are considering a proposal to limit medical liabilities, for instance, but for drivers, the best tactic is simply to do adequate research before buying a policy and to regularly check rates after any significant changes in auto insurance legislation.