Understanding Auto Insurance Claims: Drop-Off Timing And Implications

Auto insurance companies will usually consider the last three to five years of your driving record when calculating your rates. The exact length of time can vary by state, insurance company, and the nature and severity of the accident. While it's rare for an insurance company to drop you after a claim, they can cancel or opt not to renew your coverage, but they must provide notice. Your car insurance rates may increase, and this increase usually lasts for three years.

How long do claims affect insurance rates?

The length of time that claims affect insurance rates depends on several factors, including the driver's state of residence, whether they were at fault, the severity of the accident, and the insurance company's policies.

Most insurance companies will increase a driver's premium after an accident for which they were at fault. This practice, known as surcharging, typically lasts for three years but can be as long as five years, depending on the company and state regulations. Some states only allow insurance companies to surcharge at-fault accidents, while others give companies discretion to surcharge even if the driver was not at fault. The surcharge appears as an additional charge on the driver's billing statement and is usually higher for major accidents than for minor ones.

In some states, such as Massachusetts, insurance companies are prohibited or highly restricted from raising a driver's premium if the accident was not their fault. However, in states with no-fault insurance, such as Florida, New York, and Texas, insurance rates may increase even if the driver was not at fault, as all involved parties file claims to their insurance policies.

The impact of an accident on insurance rates also depends on the driver's claims history. Insurance companies typically consider the last three to five years of a driver's record when calculating rates, but this can vary by state and company. A single accident may not significantly affect rates if the driver has a clean record, but multiple accidents within this period are likely to result in higher premiums.

To lower insurance rates after an accident, drivers can compare quotes from different companies, adjust their coverage, or look for discounts, such as those offered for defensive driving courses or low mileage.

Reasons for insurance companies dropping customers

Insurance companies can cancel or choose not to renew your coverage, and they must provide notice if they do so. Here are some reasons why an insurance company might drop a customer:

Cancellation

• Failure to pay insurance premiums.
• Committing insurance fraud or misrepresenting information on an insurance application.
• Not making timely repairs requested by a new insurer after a home inspection.
• State insurance regulators may allow a home insurer to cancel policies for reasons that don't apply to the homeowner. For example, if the insurance company is undergoing financial reorganisation or is insolvent.

Non-renewal

• The insurance company may reduce the number of policies it renews or sells in your area, especially if there have been frequent natural disasters triggering lots of claims.
• The insurance company may decide to withdraw from the home insurance market in your area for business reasons.
• Committing insurance fraud.
• A significant drop in your insurance credit score.
• Filing multiple claims.

It's important to note that insurance companies rarely cancel coverage after a single accident or claim. However, they may drop you if you have a pattern of causing accidents, filing excessive claims, or not paying your premiums on time.

The impact of at-fault and not-at-fault claims

At-Fault Claims:

• Insurance Rate Increase: Being at fault in an accident almost always leads to an increase in your insurance rate. The increase can be significant, with rates going up by about 40% on average.
• Surcharges: Many insurance companies apply surcharges after an at-fault accident, which are additional charges on top of your premium. These surcharges typically last for three years but can vary by company and state.
• Loss of Discounts: If you previously had a claims-free or accident-free discount, you may lose this discount after an at-fault accident, further compounding the rate increase.
• Claim Settlement: If you are at fault, your insurance adjuster will investigate and determine the amount to be paid for the other driver's injuries, property damage, and any other valid claims.
• Negligence Laws: In some states, negligence laws come into play when determining fault. For example, in pure contributory negligence states, if you are even partially at fault, you may not be eligible for any insurance payout.

Not-At-Fault Claims:

• Insurance Rates: If you are not at fault, your insurance rates may not be impacted at all, depending on the insurance provider and the state. Some states prohibit insurance companies from raising your premium if you are not at fault.
• No-Fault States: In no-fault states, each driver's medical bills are typically covered by their own insurance (Personal Injury Protection or PIP) regardless of who is at fault. However, the at-fault driver's insurance usually pays for damage to the other driver's vehicle.
• Claim Settlement: If you are not at fault, you can file a third-party liability claim with the other driver's insurance company to cover your injuries and vehicle damage.
• Claim Payout: Even in no-fault states, you may be able to receive a claim payout from the at-fault driver's insurance if you suffer severe injuries or if certain conditions are met.
• Comparative Fault: In some cases, both drivers may share fault for the accident. Comparative fault laws in different states determine how much each driver can claim in compensation.

It's important to remember that the specific impact of at-fault and not-at-fault claims can vary depending on your state's laws, the insurance company's policies, and the nature and severity of the accident. It's always a good idea to review your insurance policy and understand your state's regulations regarding auto insurance claims.

How to lower insurance rates after an accident

An accident on your record will affect your insurance rates for around three to five years, depending on your insurance company and state regulations, as well as the nature and severity of the accident. Here are some ways to lower your insurance rates after an accident:

Shop around for a better deal

Compare quotes from several companies to find a better deal. Quotes are free and do not require a purchase. Being upfront about your claims history and driving record will help you get the most accurate quotes. Some companies offer lower rates to drivers with accidents than others or surcharge certain types of accidents at lower rates.

Adjust your coverage

You can increase your collision and/or comprehensive deductibles to save a little money. However, you don't want to cut back on essential coverage. Ask your agent or the company about potential discounts you may have overlooked in the past, such as:

• Usage-based insurance (UBI): Many companies offer a discount for signing up for their UBI program, which rates your driving practices through your smartphone.
• Low-mileage discounts: If your work commute is shorter than it was when you initiated your policy, let your insurance company know as you may qualify for a low-mileage discount.
• Bundling: If you haven't already, consider consolidating your insurance with one company by bundling your car insurance with other policies to take advantage of multipolicy discounts.

Consider accident forgiveness

Many companies offer an optional accident forgiveness benefit that protects you from surcharges after an accident. While you can't apply this benefit retroactively, it may be useful in the future. The specific terms vary by company, but you're usually eligible for accident forgiveness after going accident-free for a specified period, often three or five years.

Take a defensive driving course

Check whether your insurance provider gives defensive driver discounts. Most states offer classes in person and online, and proof of completion remains valid for up to three years depending on your state and provider.

Improve your credit

If your state allows the use of credit scores in insurance pricing, improving your credit is a great way to lower your insurance rates. Even simple moves, like making timely debt payments and reducing your credit card balances, could have a significant impact.

Reduce your annual mileage

If you've started working from home or have a shorter commute, let your insurance company know as your reduced mileage will lower your risk and insurance rates.

It's important to note that surcharges usually stay on your insurance bill for three years, and these methods may not completely offset the surcharge. However, they can help take some pressure off your wallet while you wait for the accident to no longer be considered in your insurance rates.

How to avoid being dropped by your insurance company

While it is rare for an insurance company to drop you after a claim, it is not unheard of. To avoid being dropped by your insurance company, there are several steps you can take.

Firstly, be honest with your insurance company about your driving record and other information. Insurance companies can drop you for misrepresenting yourself on an application, which is considered a form of fraud. Keeping a clean driving record is also important. Driving safely will help ensure the insurance company doesn't drop you.

It is also important to make your auto insurance payments on time. If you are not confident in your ability to remember to pay on time, consider setting up an automatic payment method to eliminate the risk of late payments. If you do miss a payment, be sure to reach out to your insurance company immediately. There is usually a short grace period after a missed payment before your insurance policy is cancelled.

When it comes to filing claims, only file those that are necessary. If the damage is minor and costs only slightly more than your deductible, it may not be worth filing a claim if you can afford to pay for the repairs yourself.

Finally, if you are considering cancelling your policy, be sure to have a new insurance policy in place before you cancel your old one to avoid a lapse in coverage, which can result in higher premiums and legal issues.

Frequently asked questions