Auto Insurance Claims: The Cost Of Convenience

Filing an insurance claim can have long-term financial consequences, such as an increase in your premium or difficulty switching providers in the future. Insurance companies calculate costs based on risk, and drivers who file claims are considered a higher risk. The number of claims filed, the type of claim, and the presence of mitigating circumstances, such as previous claims or traffic violations, can all impact your rates. While at-fault claims are more likely to increase your premium, even not-at-fault claims can lead to higher rates in certain situations. Understanding your insurance policy and the potential impact on your rates is crucial before deciding to file a claim.

At-fault accidents

In the event of an accident, one of the first things that come to mind is whether the state you are in follows a no-fault policy or not. California, for example, is one of 38 states that does not subscribe to a no-fault policy. This means that whoever is responsible for the accident will be liable to pay for the damages.

In a no-fault state, each victim of an accident will file a claim with their own insurance companies. In contrast, in a fault state, all parties involved in an accident will file a claim with the insurance of the person responsible for the accident. This means that the at-fault driver's auto insurance should pay for any property damage and medical bills, and in some cases, compensation for other damages, such as pain and suffering.

If you are found to be at fault in an accident, your insurance rate will almost always go up unless your insurer offers an accident forgiveness feature. For example, Progressive's Large Accident Forgiveness means your rate won't increase in most states if you're at fault in an accident with a claim exceeding $500.

Determining fault in a car accident is not always clear-cut and may require a thorough investigation. In California, fault is determined by examining the circumstances surrounding the accident, such as the actions of the drivers involved, the road conditions, and any other relevant factors. Insurance companies will investigate the accident and review police reports, witness statements, and other evidence to determine fault.

If you are found to be at-fault for an accident, you may be responsible for paying for any resulting damages or injuries. This can include property damage, medical expenses, and lost wages. It is important to contact your insurance company as soon as possible after an accident, as they will investigate and determine whether you are at fault. If you are found to be at fault, your insurance company may pay for damages or injuries up to your policy limit.

Comprehensive claims

Comprehensive coverage is an optional addition to most car insurance policies. It covers damage caused by or related to theft, animals, vandalism, and weather. It also compensates you if your car is stolen. Comprehensive coverage is designed to protect your vehicle against damage not caused by a collision. This can include theft, vandalism, natural disasters, and other non-collision incidents.

When you file a comprehensive insurance claim, your insurance company will typically cover the cost of repairs or replacement minus your deductible. For example, if your car has water damage from flooding, you hit a deer and dent your bumper, or a hail storm damages your car, you can file a comprehensive claim. Comprehensive insurance will pay out up to the actual cash value of your car, minus your car insurance deductible.

Filing a comprehensive insurance claim will likely raise your insurance rates. In a survey, The Zebra discovered that a comprehensive claim increases auto insurance premiums for a standard six-month policy by an average of $36, or $5 per month. This is because insurance companies consider you a higher risk to insure, as it indicates you're more likely to file future claims. However, the increase in your insurance rates will generally be less than if you had filed an at-fault accident claim.

To lower your comprehensive car insurance premiums, you can try the following:

• Increase your deductible. Just be sure you can afford the higher out-of-pocket cost if you need to file another claim.
• Shop around for different insurance providers with lower rates and policies.
• Bundle your policies. Many insurance companies offer discounts for bundling multiple policies, such as home and auto insurance.
• Reduce your coverage if you have an older car or one worth less than the cost of comprehensive coverage.
• Ask your insurance provider about any discounts you may be eligible for, such as loyal customer discounts, low mileage discounts, or safety feature discounts.

No-fault accidents

In no-fault states, drivers must carry personal injury protection (PIP) insurance, which pays for medical expenses after a car accident, regardless of who was at fault. This saves time and energy as drivers don't need to file a claim through the other driver's insurance. However, the downside of PIP is its cost—states that require PIP coverage tend to have premium rates above the national average.

In at-fault states, the person who caused the accident would have to pay for the damage. Their bodily injury (BI) liability insurance will pay for the other driver's medical expenses, and their property damage liability would cover the other driver's vehicle repairs.

Generally, a no-fault accident won't cause your car insurance rates to rise, as the at-fault party's insurance provider will be responsible for your medical expenses and vehicle repairs. However, if you have previously caused an accident or made a claim, your auto insurance rates may increase after a no-fault collision. According to the Consumer Federation of America, drivers who have been involved in no-fault accidents see an average premium increase of 10%.

Accident forgiveness

To be eligible for accident forgiveness, you typically need to have a clean driving record for a certain period, usually three to five years. Some insurers may offer it as a free loyalty perk for long-term customers, while others charge an additional fee for this coverage. It is worth noting that accident forgiveness is not available in certain states like California.

While accident forgiveness can provide peace of mind, it may not always be the most cost-effective option. In some cases, the additional cost of accident forgiveness coverage could exceed the potential increase in premiums due to an at-fault accident. Therefore, it is essential to weigh the benefits against the costs before deciding whether to opt for accident forgiveness.

Additionally, it is important to remember that even with accident forgiveness, your insurance company may still increase your rates if you file multiple claims in a short period or have other factors that contribute to a higher risk profile, such as speeding tickets or a low credit score.

Insurance claim basics

An insurance claim is a formal request for money from the insurance company by the insured to help pay for expenses resulting from a covered peril or loss. The insurance company will then evaluate the incident by sending a claims adjuster to the scene. If the claim is approved, the insured will receive a check from the insurance company to pay for the expenses (minus the cost of the deductible).

Insurance is a contract between you and your insurance company that promises to cover you financially in the event of an emergency, damage, or loss. In exchange, you promise to pay premiums at regular intervals.

Claims cover things like medical and health-related expenses, death benefits, car crashes, and incidents related to home damage. As a policyholder, you can file a claim either on paper or electronically after experiencing a loss or other incidents. For instance, if you hit someone else's car, you will need to report this to your insurance company if you want them to cover the cost of the damage. You may also be required to report the incident to your company if you were the one who was hit.

The company investigates the incident and either approves or rejects your claim. If the claim is rejected, you will likely need to cover the damage out of your own pocket. If approved, the company issues a check for the approved amount to either you or the mechanic to cover the cost of the repair.

The number of insurance claims you file has a direct impact on your rates. The greater the number of claims filed, the greater the likelihood of a rate hike. File too many claims, especially in a very short amount of time, and the insurance company may not renew your policy.

If the claim is based on the damage you caused, your rates will almost surely rise. On the other hand, if you aren't at fault, your rates may or may not increase. For example, if your car gets hit in a parking lot or a tree falls on your garage, you're clearly not at fault, and your rates may not increase. However, mitigating circumstances, such as the number of previous claims you have filed, can cause your rates to go up, even if the latest claim was not your fault.

How to Save on Your Policy

Understanding that you should only file a claim in the event of a large loss can help you save money on your insurance premiums. Since you won't be filing a claim for a minor loss, having a low deductible on your policy is unnecessary. Instead, set aside that amount in an interest-bearing savings account and raise your insurance deductible to match. Increasing your deductible will result in lower insurance rates, and the cash in the bank will cover your out-of-pocket costs in the event of an accident.

Frequently asked questions