One of the most common questions we receive on a day-to-day basis is, “Why is my auto insurance so expensive?” If you live in the State of Michigan, I’m sure you have asked yourself this questions before. There are many factors that play into the pricing structure of your auto policy, but in this article I will explain what the top 10 reasons are as to why your auto insurance policy is so expensive.
We often speak with insured’s and prospective clients about the coverage they have on their policies; All too often we find that people don’t really understand what coverage they have, thus, how can they understand why they are paying what they are paying? The answer is simple; They can’t. To truly understand why you are paying a premium you are, you need to understand what the coverage actually protects you for. Below are the top 10 reasons why your insurance rate is so expensive and a detailed explanation as to how you can combat it.
- Cost of medical coverage
The most expensive portion of your auto insurance policy is the cost of your PIP or Personal Injury Protection. Did you know that if you were involved in an auto related accident, you have coverage for the medical attention for the rest of your life? There is no limit to how much this can pay. Your auto insurance provider is responsible for up to the first $540,000 worth of medical coverage. After that, the claim is assigned to the Michigan Catastrophic Claims Association, or MCCA. The MCCA charges you a fee for each vehicle that you have insured. Currently, that fee is over $200/year, per vehicle. Once your claim goes to the MCCA, they pay out for the remainder of the insured’s life. That part in and of itself is expensive; however, where it really starts to get magnified is when medical providers charge more for auto related accident care than they do other care. How is this fair? Currently, there is no fee schedule for how much medical care providers can charge the insurance company when they are administering care for auto related accidents. For instance, if you go into the Emergency Room for a a broken arm, the cost to get an X-Ray of your arm will be lets say $100. If you go to the Emergency Room for a broken arm due to an auto accident, that same X-Ray will cost well over $500. This is a prime example as why the cost of your auto insurance is going up each year; Hospitals charging exponentially more for the SAME CARE! This is the #1 reason why the cost of your auto insurance is so expensive!
2.) Past Tickets and/or Accidents
Another factor playing into the cost of your auto insurance premium is your prior driving record. If you have prior tickets/accidents, you will likely be paying more than you would if you had a clean driving record. What does having tickets have to do with my insurance rates? Someone who has, lets say speeding tickets, is at a greater likelihood to cause or be involved with an auto related accident. The faster one is driving, the shorter time frame they have to make split second decisions and that can be the difference between being involved in an accident or avoiding one altogether.
In terms of accidents, there are different types. You can be deemed not-at-fault or at-fault. There is a large difference between how your insurance premium is affected if you are deemed at-fault or not. If you aren’t at-fault the severity of the increase will usually be minimal. However, if you are at-fault, there is a strong chance that you will be issued a surcharge on your policy. That surcharge stays on your policy(Depending on your company) for 3-5 years.
3.) Low Insurance Score
One of the heaviest weighted aspects of determining your insurance rate is your insurance score. What exactly is your insurance score? Your insurance score is the result of close to 300 different factors that are weighted by an algorithm. It is extremely difficult to explain what it is, but it’s easy to explain what it’s not! A common misconception is that your insurance score is the same as your credit score. That is 100% false! Your insurance score does take into account information obtained from credit reports, but it is not a credit score rating! Your insurance score takes into account your past pay history, claims history, and other factors. The lower your insurance score, the higher your premium. The higher your insurance score, the lower your premium will be!