At Mathenia Insurance Group we take time to answer all questions that our customers have regarding insurance coverages. A lot of our clients curious about why auto insurance keeps going up even though the value of the vehicle is depreciating. There are a lot of angles that can help you understand why insurance payments are increasing. In this article, we will cover the most common reasons why auto insurance rates keep going up over time.
The first thing that we would like to discuss is the understanding of auto insurance. Car or auto insurance may sound like it covers only your vehicle, but actually it covers way more than that. If we get into vocabulary, more appropriate term would be “auto-owners insurance.” Just like insurance for your house is called “homeowners insurance.”
Calculating any insurance premiums, in general, requires taking into consideration a lot of different variables. When it comes to a vehicle, the procedures are similar. It may seem that auto insurance is only about the value of the car, but it is not. The most significant part of the insurance premium is coverage of the risks associated with a particular driver, car, and environment.
A vehicle is a possession that can be easily replaced since it is a mass produced product. From the insurance company’s point of view, human life is way more important. An accident associated with you and your vehicle can cause bodily harm, sometimes death. Medical bill associated with treating someone after an accident can easily exceed the value of a car. Human life is invaluable; it is impossible to define how much it is worth.
When was the last time you took a couple of minutes to review your auto insurance policy? It is easy to notice that there are multiple coverages included in it. Most of the policies consist of such parts:
- Bodily injury
- Property damage
- Uninsured motorist
- Underinsured motorist
- Medical Payments
- Loss of Income
- Loss of use
- Rental Reimbursement
As you can see, your car insurance covers way more than just the value of your vehicle.
Another important aspect of calculating the insurance quote is a number of insured people by that company. Your policy is one of the millions out there. People protected by the same company have different risk levels associated with their profiles. The general idea behind the insurance by itself is spreading the costs between a more significant number of people (risk pool). Two of the same policies may have different premiums because one person can be a far more dangerous driver than another one. That is why everyone is paying their fair share of the total costs associated with fixing consequences. The risk pool is continuously changing and base of multiple different factors including the overall economic situation in the country. You are sharing the costs with tens of millions of other people, and each one of them has a different history.