Auto Insurance Claims: $5000 Impact On Premiums?

It's a common concern that auto insurance premiums will increase after filing a claim, and unfortunately, it's often true. The increase will depend on several factors, including the type and severity of the claim, your driving record, location, age, and gender. Even if you weren't at fault, your rates may still rise, although likely not as much as if you were at fault. The exact amount is challenging to predict, but one company found that at-fault claims increased rates by an average of 28%. It's worth noting that not reporting an incident could result in difficulties if another party involved in the accident sues you, and your insurance company may refuse to honour your policy if they are not informed promptly.

At-fault claims increase insurance rates by an average of 28%

At-fault claims will almost always increase your insurance rates. The exact amount that your rates will increase depends on a variety of factors, including your age, location, and insurer. According to a 2024 analysis by NerdWallet, a driver with an at-fault accident pays $849 more per year on average for a full-coverage policy than a driver with no traffic violations. This amounts to an average increase of 48% in insurance rates. However, it's important to note that different insurance companies have different rules and percentages for rate increases after at-fault claims.

The impact of an at-fault claim on your insurance rates can vary from a small increase for a minor accident to a significant increase for more severe accidents. The increase in insurance rates typically lasts for at least three years, depending on your state and insurer. Additionally, the specific details of the accident, such as the severity of the damage and the presence of any injuries, will also influence the adjustment in insurance rates.

It's worth noting that some insurers offer accident forgiveness, which is an optional coverage that prevents your insurance rates from increasing after your first accident. This coverage may be offered for free to drivers who have maintained a clean driving record for a certain period, typically around five years.

To mitigate the impact of an at-fault claim on your insurance rates, you can consider shopping around for a cheaper insurance provider, raising your deductible, adding discounts to your policy, or improving your credit score.

Not-at-fault claims can also increase insurance rates

Even if you are not at fault, your auto insurance rates may increase. A 2017 study by the Consumer Federation of America found that some companies raise rates by 10% or more for not-at-fault accidents. This is more likely to occur if you live in a no-fault state, where all parties involved in an accident file a claim with their own insurer for injuries. In such cases, your insurance rates may increase regardless of who is at fault.

However, some states, including Oklahoma and California, prohibit insurers from increasing rates if a crash was not your fault. Additionally, certain companies, such as USAA, typically do not raise rates if the policyholder is not responsible for the accident. Nevertheless, it is always advisable to compare car insurance quotes to ensure you are getting the best deal.

The impact of a not-at-fault claim on your insurance rates can vary depending on the company and their specific policies. Different insurers have different thresholds for what constitutes an unacceptable driving record. For example, a drunk driving incident will likely result in non-renewal from almost all insurance companies.

It is important to note that not reporting an accident can also have consequences. If you are sued by another party involved in the accident at a later date, your insurer may struggle to gather evidence to represent you effectively. Additionally, failing to report the incident promptly could put your insurance coverage at risk, as the company may refuse to honour your policy.

Accidents stay on your record for 3-5 years

Accidents generally stay on your record for three to five years, but this can vary depending on the state and the severity of the accident. In New York, for example, an accident will show up on your record for four years, whereas in California, accidents stay on your record for at least three years, but this can be up to ten years if a commercial vehicle or hazardous materials are involved. In Michigan, accidents usually stay on your record for seven years, but accidents involving fatalities or DUIs remain permanently.

During the time that an accident is on your record, it will be taken into consideration when your insurance company calculates your premiums, and it may result in higher premiums or even a non-renewal of your policy. After an accident, your insurance rates can go up by an average of 48% to 55%. However, if you can avoid any additional accidents, your insurance will eventually go back down.

It's important to note that different insurers have different rules about what constitutes a bad driving record. Some companies may not raise their rates after a small accident, while others might increase rates by as much as 72%. Therefore, it's a good idea to shop around and compare rates to find cheaper car insurance after an accident.

Accident forgiveness can prevent rates from increasing

Accident forgiveness is an optional add-on to your auto insurance policy that can prevent your insurance rates from increasing after your first accident. It can be purchased as an upgrade to your policy or awarded to drivers with a good driving record. It is important to note that accident forgiveness may not be available in all states and eligibility can vary by insurer.

Accident forgiveness can provide peace of mind while driving, as you won't need to worry about your insurance rate increasing due to your first accident. This can also result in long-term savings, as your premium won't increase after your first claim. Additionally, you may be able to retain any good driver discounts that you have accrued.

To be eligible for accident forgiveness, you typically need to have a clean driving record for a certain period, often around five years. This means having no accidents or violations during that time. Some insurers may also offer accident forgiveness as a reward for good driving by applying a discount to your policy or waiving a rate increase for your first accident.

It's worth noting that accident forgiveness may not cover all types of accidents. For example, a drunk driving incident may not be eligible for accident forgiveness and could result in a non-renewal of your policy. Additionally, accident forgiveness typically only applies to your first accident, and subsequent occurrences may not be covered.

In summary, accident forgiveness can be a valuable add-on to your auto insurance policy, providing peace of mind and potential savings in the event of your first accident. However, it's important to review the specific terms and conditions of accident forgiveness offered by your insurer to understand the coverage and eligibility requirements fully.

Shopping around for new insurance can lower rates

Shopping around for car insurance is a great way to find the best deal and lower your rates. By comparing prices and coverage options from multiple providers, you can save a significant amount of money on your policy. Here's how:

Gather Your Information:

Start by collecting all the necessary details, including your personal information, vehicle details, driving history, and current insurance information. This will make it easier when requesting quotes from different companies.

Decide on the Coverage You Need:

Determine the type and amount of coverage that suits your needs. Most states require a basic level of bodily injury and property damage liability coverage. You can also consider additional coverage options like collision insurance, comprehensive insurance, underinsured/uninsured motorist coverage, medical payments coverage, and personal injury protection.

Choose How to Get Quotes:

You can obtain quotes by contacting insurance company agents, using insurance brokers or independent agents, visiting company websites, or using online comparison tools. Each method has its pros and cons, but the key is to compare quotes from multiple providers.

Compare Car Insurance Quotes:

Once you have quotes from different companies, compare not only the rates but also the discounts offered. Different insurers provide various discounts, such as multi-policy discounts, good student discounts, and defensive driving course discounts.

Consider Usage-Based Insurance:

Some companies offer telematics insurance programs that track your driving habits and offer discounts for good driving behaviour. If you don't drive frequently, you can also explore pay-per-mile insurance options.

Purchase a Policy:

When you've found the best deal, purchase your policy. Remember to overlap your old and new policies by at least one day to avoid a lapse in coverage, which can increase your premiums.

By shopping around and comparing rates, you can find more affordable car insurance and save money. It's a good idea to repeat this process each time your policy is up for renewal to ensure you're getting the best coverage and rates available.

Frequently asked questions