Auto Insurance Claims: The Costly Aftermath

It's a common belief that auto insurance rates will increase after filing a claim. While this is true in many cases, it's not always the case. The increase in insurance rates depends on several factors, including the type of claim, the driver's history, the severity of the accident, and the insurance company's policies. Even if the driver is not at fault, their insurance rates may still be impacted. It is recommended to report accidents and work with the insurance company to gather evidence and represent the driver in any potential lawsuits.

At-fault accidents

If you are found to be at fault in a car accident, your insurance premium is likely to increase. The exact amount by which your rates will increase is difficult to predict, but it is generally influenced by the severity of the accident, your past driving history, and the state in which you live.

For example, you may see a higher rate increase for an at-fault accident that resulted in $20,000 worth of damage compared to a minor fender bender that cost $1,500 to repair. Additionally, if you have a history of other at-fault accidents or driving violations, your rates are more likely to increase than if this is your first at-fault accident in several years.

The state in which you live also plays a role in determining the increase in insurance rates. For instance, in Arkansas, the average insurance rate increase after an at-fault accident is 67%, while in California, it is 68%.

It is worth noting that not all insurance companies weigh claims equally. A minor accident may not increase your premium, but a major accident that totals a vehicle is more likely to result in a significant rate increase.

Furthermore, different insurance companies have different rules about what constitutes an unacceptable driving record. If your driving history deteriorates with serious traffic violations or multiple accidents, your insurance company may decide not to renew your policy. Certain types of accidents, such as drunk driving incidents, will likely trigger a non-renewal from most insurance providers.

While it is always best to report an accident, you can take steps to mitigate the potential increase in insurance rates. One option is to invest in accident forgiveness, an optional policy add-on offered by many major car insurance companies. Accident forgiveness guarantees that your rates will not increase after your first at-fault accident, providing peace of mind for drivers. However, it is important to note that not everyone is eligible for accident forgiveness, and it is typically only available to drivers with a spotless driving record.

Additionally, you can consider taking a driver's education course or shopping around for new insurance to find more affordable coverage.

No-fault accidents

In no-fault states, your own insurance typically covers your damages, no matter who caused the accident. However, you may still be able to sue the other driver in certain situations, such as when the accident caused "significant" injury, as defined by state law, or when the accident resulted in medical bills above a certain threshold. For example, in Utah, you can pursue a liability claim if you have at least $3,000 in accident-related medical expenses or if you meet the serious injury threshold.

While no-fault accidents generally do not lead to an increase in insurance rates, it is important to note that even a not-at-fault claim can raise your rates. According to a 2017 study by the Consumer Federation of America, drivers in Queens, NY, experienced an increase of $401 in auto insurance rates, while residents in Baltimore saw an increase of $258 after a not-at-fault accident. At major insurers like Progressive and GEICO, auto insurance rates went up by 10% or more after a no-fault accident, and rates at Allstate increased by nearly 5% after a not-at-fault claim.

Accident forgiveness

Some insurance companies offer accident forgiveness as a free loyalty perk for long-term customers with clean records, while others charge an extra fee to add it to your policy. It's important to note that accident forgiveness is not available in certain states, such as California, where it is deemed "excessive" under Proposition 103.

When considering accident forgiveness, it's essential to weigh the potential benefits against the costs. You should also review the fine print of your policy to understand any hidden exceptions or eligibility requirements, such as a minimum number of accident-free years.

High-risk drivers

High-risk car insurance is more expensive, but there are ways to cut costs. For example, high-risk drivers can take a defensive driving course, raise their deductible, or bundle their auto and homeowners insurance. They can also improve their credit score, ask about low-mileage discounts, and drive cautiously to build a clean driving record.

When it comes to auto insurance claims, high-risk drivers should be aware that their rates are likely to increase, especially if the claim is due to an at-fault accident. The exact amount of the increase will depend on the severity of the accident, the driver's past driving history, and the insurance company's policies.

To find the best rates, high-risk drivers should shop around and compare quotes from multiple insurance companies, including those that specialize in high-risk insurance, such as The General, Safe Auto, and National General. They can also consider state-sponsored auto insurance plans, which are typically a last resort and tend to be more expensive.

Overall, high-risk drivers should be prepared to pay higher auto insurance rates and be proactive in finding ways to reduce their costs.

Claim-free discounts

To qualify for a claim-free discount, you generally need to maintain a clean claims history for a specific period, typically between three and five years. Some companies offer a discount after three years, while others require up to seven years of clean driving. It's important to note that not all insurance companies offer claim-free discounts in all states, and the definition of a "claim" can vary. Comprehensive claims under $1,000, glass-only claims, and emergency road service claims may not disqualify you from the discount in some states. However, in other states and with other insurance companies, your claim-free discount could be removed for any claim, regardless of the amount or type.

If you believe you meet the requirements for a claim-free discount but have not received one, contact your car insurance company. Additionally, some companies only apply the discount if customers specifically request it. By taking advantage of claim-free discounts, you can save anywhere from 10% to 35% on your car insurance rates.

Frequently asked questions