What happens to your insurance rates when you have a wreck

Will you pay more for your insurance if you have an accident?

So you’ve had an accident – and you want to know if you’re going to pay more for your car insurance. Your auto insurance premiums could go up. But then again, you could pay the same. It depends on a number of factors. I’ve collected some helpful principles on whether auto premiums will increase after you have an accident.

Your Insurance Company

Your insurer plays the biggest role in determining whether your rates will increase. After all, your insurance company takes on your risk every month. If their actuaries say it’s now more expensive to insure you, you’re stuck with it. Not every actuary is the same. Where one company will tack on a 10% premium surcharge in a given accident, another company won’t do anything. That’s why I’ve included other factors that influence their decision.

Were You At Fault?

A big factor determining whether your auto premiums go up after an accident is if you were at fault. If you caused the accident and the damages were over a certain threshold (often $500 after deductible) a surcharge is likely. How much of a surcharge depends on the severity of the damage and your insurer. When I was an agent, surcharges came in 10% increments. Those surcharges lasted 3 years in most cases.

Another consideration: “At-Fault” is sometimes determined by percentage of fault. If you are 25% at fault in an accident, a surcharge is less likely compared to a person who was 75% at fault. Your state mandates whether at-fault percentages are a factor for surcharges.

It is possible for your insurance company to raise your rates even if you were not at fault. If that happens, the insurer weighs a number of factors, ex. number of claims, frequency of claims, severity of claims, longevity of customer. In other words, just because you weren’t at fault doesn’t mean your rates will stay the same.

Discounts & “Accident Forgiveness”

If you’re a good driver, you may be enjoying a good driver discount. However, an at-fault accident will probably eliminate your discount. Even if you don’t get a surcharge, you’ll pay extra premium if you lose your discount.

Some companies also offer “Accident Forgiveness.” This feature allows policyholders a “free” accident where the company will not surcharge you for an at-fault accident. Keep in mind – you pay for that option. Although it’s not the same price, it’s like prepaying on a premium surcharge. There may be additional limitations to that option, so read your policy.

What Can I Do If I Get Surcharged?

If you feel you’re getting an unjust premium surcharge, you can appeal to your state’s department of insurance. That action may reflect negatively if your policy comes up for renewal and you don’t want to be cancelled. Only take that step if you are confident in your innocence.

Also, you can always shop for a new policy. You could still save money even with an at-fault accident. Always disclose any incident if you talk to other insurers. It takes awhile for the an accident to show in their reports. They could cancel you if you fail to mention the incident when they discover it.

Three Steps to Improve Your Credit And Pay Less for Auto Insurance

How your credit will affect your car insurance rates.

All of us want to pay less for car insurance.  Sometimes it feels like we are pouring hundreds of dollars down the drain, especially when we go for years without making a claim.  So it makes sense to do everything you can to cut car insurance costs.

But there may be one thing you haven’t considered.

Many consumers cut costs by raising deductibles on comprehensive and collision coverage. Some may even eliminate collision coverage for an older car altogether.

Improve Your Credit For Cheaper Rates

Yet a less obvious way to get cheaper car insurance is to improve your credit score. Yes, that annoying number you see when you check your credit haunts you enough. But the reality is that it usually impacts your car insurance costs, too!

Your credit report reflects who you are.

In addition to showing your credit and payment habits, it has transformed into much more.  Your credit report now shows additional items, like where you work, how much you earn, how long you have worked in your present job, tax liens or judgments against you, and other things – information not seemingly related to your bill payment history.

Insurance Companies Use Credit To Determine Rates

As a result, many car insurance companies have jumped on this information.

Car insurance companies now have statistical evidence proving that people with lower credit scores make more claims. Insurers have convinced themselves that this statistic-while not true for every single driver-applies to a lot of people. In industry lingo, it’s called actuarial data.

But what does this mean to you?  Simple: If you have a low credit score, a car insurance company will infer a higher likelihood of making claims and, thus, charge you a higher premium.

Three Steps To Improve Your Credit

The best thing you can do is improve your credit score.  You should already be monitoring your credit and behave in such a way to maximize that number. But this insurance revelation should provide even more motivation for having a good credit score.

Here’s three steps to take to improve your credit and lower your auto insurance:

1) Get a copy of your credit report every year. Examine it carefully to make sure all the information is true and accurate.

2) Don’t assume that, even if you haven’t missed any credit card payments, your credit report will be fine. Many credit reports contain errors – some even report incidents for other people entirely. That’s why it’s important to check yours periodically.

3) Act in a way to keep your credit clean.

By taking these steps to improve your credit score, you’ll improve your chances of getting better financing on your house or car. In time, you should also pay less for your car insurance.