Will my rates go up if I have an accident or file a claim?
Auto Accidents
Well to put it bluntly- yes. Yes, your car insurance rates are probably going up after a car accident. I know you do not want to hear that but it is true. Anyone who tells your differently is either afraid to tell you the truth or does not know what they are talking about!
In order to understand why car insurance rates go up after an accident or claim, you first need to have at least a general understanding of how car insurance companies determine their rates to begin with. If you file a home insurance claim expect your home insurance rates to increase. Trust me, it is not as cut and dry as you think. There are multiple layers and variables that go into a home or car insurance rate. Different Insurance companies can weight those factors differently when establishing pricing. Clients ask me this question all of the time.
Insurance companies set their price based on very particular set of facts, risks and other circumstances at given moment or for a specific home insurance quote. Some factors insurance companies consider are the loss or claim history, credit scores, and length of time of prior insurance with no gaps in coverage. If the risks change then the insurance company changes the insurance rate. If you were going to rent a car to a complete stranger, would you not want to know as much information as possible about the person? You would at least want to know of their prior driving record. If the driver renting the vehicle has had previous accidents, wouldn’t you charge them more for the vehicle rental?
So how much will my rates go up?
Insurance Rates Accidents
So how much will my insurance rates go up after an accident or claim? The rate increase depends on several factors, whether you were at fault or not at fault is a major consideration. In addition, the amount paid on property damage vs bodily injury claims will partially determine a rate increase for your insurance. Take a close look at your car insurance policy and it will tell you what the threshold is for accidents and rate increases. In addition the auto insurance rate increase depends on your prior driving history and the number of prior accidents that you been involved in.
If this was your first accident or claim in a while, the insurance company may take it easy on your rates, but if you have had multiple accidents and claims in short period of time 1-3 years you can expect and insurance rate increase. The problem with this is you may not be able to find a lower rate and you may have to accept the insurance renewal until some of the driving activity drops off your records. Some insurance companies can go back five years for your driving activity.
When shopping for the best car insurance drivers mainly chose based on price, service, and reputation. But one element that is often overlooked is a company’s surcharge schedule for driving accidents and tickets. Surcharge amounts for tickets and accidents are different for each insurance company. Some insurance companies even waive your first or minor accident if this is your first accident in years. As part of the rate filing process insurance companies file the rates in advance with the department of insurance. Some companies may charge 25% or more for tickets or accidents on your driving record. If you have purchased a new car combined with a recent auto accident you could expect to see an increase in insurance rates.
What about accident forgiveness?
car accident claims
Of course there is this thing called “accident forgiveness” which many insurance companies have made you believe is some free feature that they just give out from the kindness of their heart. What many people do not know is it is not free. You have to pay extra for accident forgiveness ahead of time . Think about that for a second, you have to pay the insurance company an extra amount over and above your base rates so they do not charge you extra if you get into an accident. Well of course they will not charge you extra after an accident because they are already charging you extra the whole time you have had accident forgiveness. Make sense?
If you have accident forgiveness you are basically pre-paying your rate increase ahead of time.
I bet you have never thought of it that way have you? What happens if you do not get involved in an accident? You have handed over extra cash for no reason. You could say the same thing about insurance in general . If however, you do not purchase accident forgiveness up front you can still get it for free over time if you are a safe auto driver. Many insurance companies will forgive your first accident if you have been claims free for 3-5 years prior to your most recent claim. The time frame depends on the insurance company.
So how do you avoid an insurance rate increase? It is simple be a careful safe driver. Keep your loss history and driving record as clean as possible. Before filing a claim find out your deductible and get an estimate. Determine if the damage is less then your deductible. Stay tuned for my next article, Will my home insurance rates decrease if my credit rating improves?
