Auto Insurance Premiums: Accident Cost Implications

Car insurance rates typically increase after an accident, especially if it's an at-fault accident. The increase in insurance rates after an accident is due to insurance companies calculating premiums based on risk. Statistically, drivers who have been in an accident are more likely to be involved in another one, and a rate increase protects insurance companies from losing money. The exact amount that insurance rates go up depends on several factors, including the driver's age, location, insurance provider, driving record, claims history, and geographic location. Young drivers may experience the highest increases after an accident since insurers view them as a risky group to insure.

In addition to at-fault accidents, no-fault accidents and comprehensive claims can also lead to higher insurance rates. Comprehensive claims include non-collision events such as car theft, vandalism, fire, and natural disasters. These events are beyond the driver's control, but they can still impact insurance rates because they indicate a higher risk of filing more claims.

To mitigate the impact of an accident on insurance rates, drivers can consider enrolling in an accident forgiveness program, improving their credit score, increasing their deductible, or shopping around for a different insurance provider. It is important to note that insurance rates may vary by state and insurance company, so it is advisable to speak with an insurance representative to understand how an accident will affect your specific situation.

How much insurance increases after an accident

The increase in insurance costs after an accident depends on a variety of factors, including the type of accident, the insurance provider, the driver's age, location, and gender, and their driving record.

On average, car insurance rates can increase by up to 45% or more after an at-fault accident. This can translate to an increase of around $800 to $900 per year. The exact amount varies across insurance companies, with State Farm offering the lowest rate for drivers after an accident, at an average of $1,953 per year.

Even if a driver is not at fault, their insurance premium may still be impacted. Accidents that aren't the driver's fault can indicate a higher likelihood of future accidents and may result in a rate increase, although typically not as high as for at-fault accidents.

Additionally, comprehensive claims, which include non-collision events like car theft, vandalism, fire, and hitting an animal, can also lead to an increase in insurance rates.

To mitigate the impact of an accident on insurance rates, drivers can consider enrolling in an accident forgiveness program, improving their credit score, increasing their deductible, or shopping around for alternative insurance providers.

How long does an accident stay on your record

An accident will stay on your record for three to five years, depending on your location, the severity of the accident, and your insurance provider. In California, serious driving violations like DUIs can remain on your record for up to 13 years. In Florida, alcohol-related violations will be on your record for 75 years.

Accident forgiveness is an option offered by some insurance companies, which means they won't raise your premium after your first accident. However, you usually have to pay extra for this coverage, and it may not be available in your state.

Why do insurance rates go up after an accident

Insurance rates go up after an accident because accidents indicate a heightened risk for insurance companies. Statistically, drivers who have been in an accident are more likely to be involved in another traffic violation. Therefore, insurance companies adjust premiums to reflect the higher risk of insuring drivers who have been in an accident.

Even if a driver is not at fault, their insurance premium may still be impacted. If an insurance company has to cover a claim, their rates could increase depending on the state and company. This is because the driver may live or drive in an area where a higher number of accidents happen, or they may face other risk-increasing factors.

At-fault accidents almost always raise insurance rates to a greater degree than no-fault accidents. However, any car insurance claim can impact a driver's premium. Filing multiple claims within a short period can lead to a higher risk assessment and, consequently, higher rates.

The length of time that an accident will remain on a driver's record depends on the carrier, the state, and the severity of the incident. Typically, insurance companies will surcharge rates for three to five years following a driving incident.

How to prevent insurance rates from going up after an accident

Even if you weren't at fault, your insurance rates may increase after an accident. This is because insurance companies calculate premiums based on risk, and drivers who have been in an accident are statistically more likely to be involved in another.

Enrol in an accident forgiveness program

If you are enrolled in an accident forgiveness program before the accident, you might be able to waive the surcharge. Most accident forgiveness programs allow you to waive the first at-fault accident loss from your policy. However, this usually only applies once within a set timeframe, typically three to five years.

Improve your credit

Most states allow insurance companies to consider your credit-based insurance score when determining rates. Improving your credit score can help bring down your insurance rate over time.

Increase your deductible

The higher your deductible, the lower your premium will typically be. However, keep in mind that if you raise your deductible, your out-of-pocket expenses will be higher if you need to file a claim.

Look for discounts

Most insurance companies offer a range of discounts, such as good student discounts, multi-policy discounts, and usage-based telematics programs that monitor your driving and reward safe practices.

Shop around

Compare quotes from different insurance companies, as you may be able to find a cheaper rate. Different insurers have varying policies on adjusting rates after an accident, and another provider may not weigh at-fault accidents as heavily when calculating rates.

How to lower insurance rates after an accident

Car insurance rates typically increase after an accident, especially if it's an at-fault accident. However, there are several ways to lower your insurance rates even after an accident.

Shop Around for a New Insurer

It's a good idea to compare quotes from at least three different insurance companies every 6-12 months. This is because each insurer uses its own methods to calculate insurance premiums, so you might be able to find a better rate elsewhere.

Reduce Your Coverage

While you should never drive without insurance, if your rates have increased to the point where insurance is no longer affordable, you can consider removing certain types of coverage from your policy or lowering your limits. Just make sure you're still carrying at least the minimum amount of car insurance required by your state.

Take a Defensive Driving Course

Most major insurers offer discounts if you complete an approved defensive driving or driver education course. These courses cover road safety techniques, ways to avoid accidents, and traffic laws in your state. In some cases, taking a defensive driving course can also help you remove a ticket or points from your record if the accident occurred while you were committing a moving violation.

Check for Discounts with Your Insurer

Most major insurers offer a variety of discounts that you may be eligible for even if you've recently been in an accident. For example, you may be able to save money by bundling policies, setting up autopay, or going paperless. Other common types of discounts include those for safe driving, membership in certain groups, anti-theft and safety equipment, paperless billing, upfront and auto-payment, and multiple policies.

Improve Your Credit

In many states, car insurance companies take your credit-based insurance score into account when determining your rates. Therefore, taking steps to improve your credit, such as staying within a personal budget, paying off debts, and addressing any discrepancies on your credit report, may help lower your insurance rates over time.

Increase Your Deductible

The higher your deductibles, the lower your premium will typically be. However, keep in mind that if you raise your deductible, your out-of-pocket expenses will be higher if you need to file a claim.

Choose a Different Car

The make and model of your vehicle can also influence your insurance costs. Some cars are more expensive to insure due to their safety profile, repair costs, or other factors. Consider switching to a vehicle that is known for its safety and affordability, such as a Toyota Camry, to potentially reduce your premiums.

Frequently asked questions