What happens to your insurance rates when you have a wreck
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.