Auto Insurance Premiums: Zero-Fault Accidents And Their Impact

Car insurance rates can increase after a no-fault accident, but this is not always the case. A no-fault accident means you weren't responsible for causing the collision. While a no-fault accident generally won't cause your car insurance rates to rise, there are situations in which your premiums may increase. For example, if the at-fault driver is uninsured or underinsured, your insurer might have to cover your accident-related expenses, which could result in higher premiums. Additionally, if you have a history of accidents or claims, or if the accident was severe, your rates may also go up.

How is fault determined in an accident?

Fault determination in an accident is a complex process that varies depending on the state and the insurance company involved. Here is a detailed overview of how fault is determined in a vehicular collision:

The Role of Insurance Companies and State Laws

Insurance companies play a crucial role in fault determination by reviewing accident details, events preceding the incident, and gathering information from all parties involved, including witnesses. They assess the damage, analyse physical evidence, and review police reports to establish fault. Additionally, insurance companies adhere to state laws and regulations when determining fault. Most states operate under a "tort liability" insurance system, where the at-fault driver's insurance covers injury expenses. In contrast, no-fault states require drivers to purchase personal injury protection (PIP) insurance, covering medical costs regardless of fault.

Negligence and Degree of Fault

The concept of negligence is central to fault determination, but its definition varies by state. Fault is typically assigned to the party that was most negligent or in greatest violation of state laws. In some cases, multiple parties may share responsibility for an accident. The degree of fault is important, as it determines the percentage of damages each party is liable for. In comparative negligence states, a weighted percentage of fault is assigned to all parties, with the degree of fault directly impacting the compensation received.

Evidence and Witness Testimonies

Evidence from the accident scene, such as photographs, physical damage, and police reports, plays a crucial role in fault determination. Witness testimonies are also valuable, especially when there is no clear evidence of who is at fault. Insurance companies may reach out to witnesses to get their account of the accident.

Arbitration and Legal Proceedings

When fault cannot be determined by the involved parties, police, or insurance companies, arbitration or legal proceedings may be necessary. Arbitration involves a neutral arbiter who decides the percentage of fault for each driver. Alternatively, drivers may choose to file a lawsuit and go to small claims court to seek compensation for damages. In some states, drivers who are even partially at fault may face restrictions on recovering damages from other drivers.

What is no-fault insurance?

No-fault insurance, sometimes referred to as personal injury protection insurance (PIP), can help cover your and your passengers' medical expenses and loss of income in the event of a covered accident, regardless of who is at fault. This is what sets no-fault insurance apart from other types of auto insurance, such as comprehensive, collision, and liability insurance, which reimburse for damages depending on who is at fault for the accident. As long as the accident is covered within the terms of your policy, PIP coverage pays for medical bills, income losses, and other related expenses incurred by you or your passengers (after your deductible and up to your covered limit).

No-fault insurance is mandatory in 18 states, but some states require that medical expenses incurred in an accident are covered by medical payments insurance, not no-fault insurance. In no-fault insurance states, drivers are usually required to have a minimum amount of PIP coverage to ensure people have coverage if they are injured in an auto accident. This coverage is often in addition to auto coverages like bodily injury and property damage.

In no-fault insurance states, each driver must file a claim with their own insurance company, regardless of who is at fault. This means that all medical expenses are paid by each driver's individual insurance company. However, damage to your vehicle would be covered by either your collision insurance or the other driver's liability policy, not by no-fault insurance.

How to prevent rate increases after a no-fault claim?

While a no-fault accident may not always lead to an increase in your insurance rate, there are situations in which it can. Here are some ways to prevent rate increases after a no-fault claim:

Understand the factors that determine rate increases

Several factors determine how much insurance rates go up after an accident. These include your auto insurance provider, driving record, claims history, geographic location, age, gender, and the severity of the accident. Young drivers may experience the highest increases after an accident, as insurers typically view them as a risky group to insure.

Enroll in an accident forgiveness program

If you are enrolled in an accident forgiveness program before your accident, you may be eligible to have the surcharge waived. These programs are offered by many major insurance providers and allow you to waive the first at-fault accident loss from your policy. However, you can usually only waive one loss within a set timeframe, typically three to five years.

Improve your credit score

In most states, car insurance companies can consider your credit-based insurance score when determining rates. Improving your credit score may help bring down your insurance rate over time.

Increase your deductible

Raising your deductible on comprehensive and collision coverage will usually lower your premium. However, keep in mind that a higher deductible means higher out-of-pocket expenses if you need to file a claim.

Shop around for a new insurance provider

If your insurance rate increases after a no-fault accident, consider switching to another carrier. Different insurance companies weigh no-fault accidents differently when calculating rates, and you may be able to find a cheaper rate elsewhere.

How long will a no-fault claim affect insurance rates?

A no-fault claim can affect insurance rates for up to three to five years. This is the typical length of time that an auto insurance claim will stay on a driving record. However, the duration may vary depending on the state of residence and the severity of the collision. For example, a minor collision will remain on a record for five years, while a hit-and-run accident will stay on a record for eight years.

In most cases, a no-fault accident will not cause car insurance rates to rise, as the at-fault party's insurance provider will be responsible for the other driver's medical expenses and vehicle repairs. However, if the at-fault driver has little or no car insurance, the other driver's insurer may have to use their uninsured/underinsured motorist coverage to cover their expenses, which could result in increased premiums. Additionally, if a driver has previously caused an accident or made a claim, their 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%.

It is worth noting that different insurers increase rates differently. Some may raise premiums by 10%, while others may charge only 2% more. Certain states, such as California and Oklahoma, do not allow insurance companies to increase rates after a non-fault claim.

Why do car insurance rates increase after an accident?

Car insurance rates are calculated based on risk. If you are deemed to be a higher risk, your premiums will likely increase. There are several factors that determine how much insurance goes up after an accident, including your auto insurance provider, driving record, claims history, geographic location, age, and gender.

Even if you are not at fault, your insurance premium may still be impacted. If your insurance company pays to cover your claim, your rates could increase depending on your state and insurance company. This is because insurers perceive drivers with a history of accidents as high-risk and impose higher rates to mitigate the associated risk.

The severity of the accident also plays a major role in determining the subsequent cost of an insurance claim. More severe accidents can result in higher increases in insurance rates. When assessing the severity of a car accident claim, insurers take into account costs such as medical expenses, vehicle repairs, and property damage.

In addition, the type of insurance coverage you have can also affect whether your rates increase after an accident. For example, if you have uninsured or underinsured motorist coverage, your insurer may dip into this coverage to pay for your accident-related expenses if the at-fault driver has little or no insurance.

It's important to note that not all states permit insurance companies to raise rates after a no-fault accident. Some states, such as California and Oklahoma, have regulations prohibiting insurers from increasing rates if the driver was not at fault.

To prevent or mitigate rate increases after an accident, you can consider shopping around for better rates, reviewing your coverage, and improving your credit score. You may also want to look into accident forgiveness programs offered by some insurance companies, which can help shield you from rate hikes following a first accident.

Frequently asked questions