Small Claims And Auto Insurance: What's The Real Cost?

Whether a small claim will raise your auto insurance rates depends on a number of factors. The most significant factor is the type of claim and whether you were at fault. Accidents where you are at fault will almost always raise your insurance rate, with the increase depending on the severity of the accident and the cost of the claim. Even if you are not at fault, your rates may still increase, especially if you have a history of claims or driving violations. Some insurers offer accident forgiveness programs for your first accident or smaller accidents, so you won't see a rate increase in these cases.

At-fault accidents

If you are found to be at fault in an accident, your insurance rates will almost certainly increase. The extent of the increase depends on several factors, such as your driving record, the type of accident, and the severity of the accident.

The increase in insurance rates for at-fault accidents can vary from 3% to 50% or more, depending on the insurance company and other factors. On average, rates increase by around 20% to 40% and can stay in effect for two to five years, although this can vary by insurer. Some companies may put rate hikes in effect for about two years, while others may penalize you with higher rates for about five years.

An at-fault accident can impact your insurance rates for a significant period. It will remain on your driving record for up to six years, and insurance providers will adjust your costs accordingly during this time. The length of time an at-fault accident affects your rates also depends on your state. For example, states like New York and Texas allow insurance companies to apply surcharges for accidents for the past three years, while Massachusetts allows surcharges for five years.

How to Mitigate the Impact of an At-Fault Accident on Your Rates

There are a few ways to potentially reduce the impact of an at-fault accident on your insurance rates:

• Accident forgiveness: Some insurance companies offer accident forgiveness, which means they won't raise your rates after your first accident. This may be included as a free perk for customers with a clean driving record, or it may be an add-on that you can purchase.
• Safe driving history: If you have an overall safe driving history, your insurer may be more lenient about a single accident.
• Defensive driving course: Completing a defensive driving course may help keep your rates low, as some insurers offer discounts for drivers who voluntarily improve their driving skills.
• Shop around: Different insurance companies have varying policies on adjusting rates after an accident. Shopping around may help you find a better rate, especially if you have a good driving record.

No-fault accidents

In most cases, a no-fault accident won't cause your car insurance rates to rise. This is because the financial burden falls on the at-fault party's insurance provider, meaning your insurer doesn't need to pay out. If you aren't responsible for an accident and you file a claim against the at-fault party, it's unlikely you'll see an increase in your car insurance costs. Even if you have to file against your own insurance policy, some insurance companies still won't charge you more because of a non-fault claim.

However, there are some situations where a no-fault accident can lead to higher insurance rates. If you have a history of accidents or claims, your rates may increase after a no-fault collision. According to the Consumer Federation of America, drivers who have been in no-fault accidents experience an average premium increase of 10%. Additionally, if an uninsured driver hits your car, your insurance company may be liable for your injuries and vehicle damage through uninsured motorist coverage. As this increases costs for the insurance company, they may pass this on to you in the form of higher premiums.

The impact of a no-fault accident on your insurance rates can also depend on the state you live in. Some states have no-fault laws that require drivers to file claims with their own insurance companies, regardless of fault. In these states, your rates typically won't increase after a no-fault accident unless there are other aggravating factors. However, in other states, your rates may go up depending on the insurance company's policies and the severity of the accident.

If you're facing a potential rate increase after a no-fault accident, you can take steps to protect yourself financially. Contact your insurer to understand their policies on no-fault claims and explore options for lowering your rates, such as accident forgiveness programs. You can also compare quotes from other insurance providers that offer competitive rates for drivers with no-fault claims.

Comprehensive claims

Comprehensive insurance is an optional addition to most car insurance policies. It covers damage caused by or related to theft, animals, vandalism, and weather. It does not cover collisions with another vehicle or object, damage caused to other people's vehicles or property, injuries caused to people in other vehicles, or the cost of medical treatment for you or your passengers.

Comprehensive insurance claims will likely increase your insurance rates, although not as much as an at-fault accident claim. This is because insurance companies consider you a higher risk to insure, as you are more likely to file future claims. On average, a comprehensive claim will raise your premium by $5 per month, or $36 over the course of a standard six-month policy. The rate increase could be as low as 3% and last for two to five years.

If you have multiple comprehensive claims, your rates will increase further. Filing two comprehensive claims will raise your insurance rates by $82 over a standard six-month policy, on average.

Accident forgiveness

Some insurance companies offer accident forgiveness as a free loyalty perk for long-term customers with good driving records, while others charge an additional fee for this coverage. It's important to note that accident forgiveness only applies to at-fault accidents and collision-type claims, not comprehensive claims.

When deciding whether to purchase accident forgiveness, consider the likelihood of an at-fault accident, the additional premium cost, and whether the coverage applies to all drivers on the policy. It's also essential to read the fine print, as some companies have specific rules about accident forgiveness, such as requiring a certain number of accident-free years before offering this benefit.

While accident forgiveness can provide peace of mind, it's not a guarantee against rate increases. Even with accident forgiveness, your premium could still go up due to other factors, such as losing good driver or claim-free discounts. Additionally, accident forgiveness is not available in certain states like California, Connecticut, and Massachusetts.

Not-at-fault accidents

Even if you are not at fault in a car accident, your insurance rates may still increase. This is because insurance companies calculate costs based on risk, and the more accidents you are involved in, the higher the probability that you could be involved in another crash. This means that you pose a higher risk to insure for your company.

In the case of a not-at-fault accident, you would typically file a third-party claim with the insurance company of the driver who caused the accident. In this case, you would not expect your insurance rates to be affected. However, there are a few scenarios in which your rates may increase:

• The other driver may not have enough insurance coverage, or any insurance at all. In this case, you would need to rely on your own insurance policy if you have uninsured/underinsured motorist coverage. Using this coverage may affect your insurance rates, depending on your state and insurer.
• The other driver's insurance company may dispute their liability or the extent of your damages, leading to a lengthy negotiation process or even a lawsuit. In this case, you may need to hire a personal injury lawyer and file a first-party claim with your own insurance company. Filing a first-party claim may result in a rate increase, depending on your state and insurer.
• The number of previous claims you have filed, your driving record, the frequency of natural disasters in your area, and even your credit score can all contribute to an increase in your insurance rates, even if the latest claim was not your fault.

It is important to note that insurance providers vary in how they handle not-at-fault claims. Some insurers uphold a policy of not penalizing drivers for accidents they didn't cause, while others may adjust premiums based on their own criteria, which can include the number and type of claims filed, regardless of fault.

To protect yourself financially, it is recommended to contact your insurer and ask about their policies regarding not-at-fault claims and how they may affect your rates. You should also keep a record of all communications with car insurance companies and compare quotes from other insurers if necessary.

Frequently asked questions