Auto Insurance Claims: Property Damage And Your Premiums

If you're in an accident and need to file a property damage claim, you're probably wondering how it will affect your auto insurance rates going forward. While it depends on the specifics of the accident, the driver at fault, and the insurance company, filing a claim will likely result in an increase in your auto insurance rates. This is because insurance companies calculate premiums based on how much of a risk they think you'll be, and an accident on your record – whether it's your fault or not – makes you a riskier driver to insure.

How to determine if a claim is worth filing

When determining whether a claim is worth filing, it is important to consider the extent of the damage and the potential costs of repair. If the damage is minor and can be easily repaired or replaced, it may not be worth filing a claim, as the costs may not exceed your deductible. In such cases, filing a claim may also increase your insurance rates and impact your insurability in the future.

On the other hand, if the damage is significant and requires substantial repairs, it is generally advisable to involve your insurance company. Catastrophic damage or loss is precisely what your insurance is designed to cover. By filing a claim, you can receive assistance in navigating the claims process, assessing the damage, and expediting the necessary procedures.

It is also worth noting that your homeowner's insurance typically covers vehicle damage, so if your property is damaged by a vehicle, you can file a claim with your homeowner's insurance if the driver's liability insurance is insufficient. Additionally, if the driver is uninsured, your homeowner's insurance may cover the damage, although you may be responsible for paying the deductible.

To determine whether a claim is worth filing, consider the following:

• Assess the extent of the damage: Is it minor or significant? Will the repair costs exceed your deductible?
• Evaluate your insurance coverage: Are you adequately protected in the event of a claim? Are there any exclusions or limitations you should be aware of?
• Consider the potential impact on your insurance rates and insurability: Filing a claim may lead to increased rates or impact your ability to obtain insurance in the future.
• Seek professional advice: Consult with a qualified professional to obtain a repair estimate and make an informed decision.

How insurance companies determine rates

Insurance companies use a multitude of factors to determine the rates of auto insurance policies. These factors can be grouped into several categories, including:

• Driving Record: The better one's driving record, the lower the premium. Accidents, serious traffic violations, and a lack of insurance history can all lead to higher rates.
• Car Usage: The more one drives, the higher the chance of accidents, so insurance rates tend to be higher for those who drive for work or long commutes.
• Location: Urban drivers often pay more due to higher rates of vandalism, theft, and accidents. Specific factors include where one parks their car, anti-theft features, and local trends in litigation, repair costs, fraud, and weather.
• Personal Factors: Age and gender influence insurance rates, as younger and male drivers are statistically more likely to be involved in accidents.
• Vehicle Type: The cost of the car, the likelihood of theft, repair costs, engine size, and safety record all play a role. Insurers also consider the potential damage a vehicle could inflict on another car in an accident.
• Credit Score: A credit-based insurance score is used to predict the likelihood of filing a claim and the potential cost.
• Coverage Type and Amount: The basic insurance limits, deductible amount, and additional policy options (e.g., collision coverage) impact the overall cost.
• Claims and Insurance History: A history of claims suggests future claims are more likely, leading to higher rates. Lapses in coverage or failure to pay premiums can also increase premiums.

In addition, insurance companies may offer discounts for factors such as good grades for students, annual premium payments, auto payments, digital statements, and long-term loyalty to the company.

While these are general factors, it is important to note that insurance rates can vary significantly between companies, so shopping around and comparing quotes is essential to finding the best rates.

When insurance companies can drop you after a claim

It is rare for an insurance company to drop you after a claim, but it can happen. Providers can cancel or opt not to renew your coverage, but they must provide notice.

Insurance companies can cancel your policy within the first 60 days of issue without providing a specific reason. After that, they are more likely to wait until the policy is up for renewal and then either raise the premiums or choose not to renew.

• A history of claims: If you have a history of filing a large number of claims, the insurance company may see you as a higher risk and choose not to renew your policy.
• Non-payment or late payment of premiums: If you fail to pay your premiums on time or at all, the insurance company may cancel your policy as they cannot be sure that you will pay in the future.
• Fraud or misrepresentation: If the insurance company discovers that you have misrepresented information on your application or committed fraud, they may cancel your policy.
• Loss of driving privileges: If you can no longer drive legally, due to a suspended license or a health issue, your insurer may cancel your policy.
• Driving under the influence (DUI) or driving while intoxicated (DWI): Many insurance providers will drop a driver convicted of a DUI or DWI. Providers tend to view those with such convictions as higher risk.

It is important to note that state laws vary, and there may be exceptions to these reasons. If you receive a notice of cancellation or non-renewal, contact your insurance company to understand the reason and explore any options to keep your coverage or find alternative insurance.

What to do if your insurance rates increase

If your insurance rates increase, there are several factors to consider and approaches to take to mitigate the impact. Here are some steps you can take:

• Understand the reasons: Insurance rate hikes are typically tied to increased insurance risk. Common reasons include a history of claims, driving violations, address changes, adding new vehicles or drivers, and increases in repair costs or claims in your area.
• Review your policy and coverage: Familiarise yourself with the terms of your insurance policy. Understand what is covered and what factors may contribute to rate increases. Contact your insurance provider or agent to clarify any uncertainties.
• Assess the severity of the damage: If the damage is minor and can be repaired or replaced at a low cost, it may be more advantageous to handle the loss on your own. Filing a claim for minor issues may lead to higher insurance rates and impact your insurability in the future.
• Consider the type of insurance: Distinguish between different types of insurance policies, such as homeowner's insurance, business property insurance, and auto insurance. Claims made on one type of policy will generally only affect the rates and coverage options for that specific type.
• Maintain a good payment history: Insurance companies value customers who consistently pay their premiums on time. A positive payment history can help maintain lower insurance rates and demonstrate your reliability as a customer.
• Improve your credit score: Auto insurance companies often consider credit scores when determining rates. Improving your credit score can help reduce your insurance risk profile and potentially lower your rates.
• Shop around for better rates: Compare rates from different insurance providers. You may find that another company can offer you a more competitive rate, especially if your current insurer has implemented rate hikes to compensate for their losses.
• Increase your deductible: Opting for a higher deductible on your insurance policy can lead to lower premiums. However, be sure to weigh this option against the potential out-of-pocket costs if you need to file a claim.
• Explore discounts and bundles: Look into various discounts offered by insurance companies, such as those for bundling home and auto insurance policies, being a homeowner, or going paperless. These discounts can help offset rate increases.
• Practice safe driving: Maintaining a clean driving record, free of violations and accidents, is crucial for keeping your insurance rates low. Drive carefully, obey traffic rules, and consider taking defensive driving courses to improve your skills.
• Choose your vehicle wisely: The type of car you drive can impact your insurance rates. Certain vehicles may be more expensive to insure due to higher repair costs or a history of claims for that model. Research insurance costs before purchasing a new car.

How long accidents stay on your insurance record

Accidents will typically stay on your insurance record for three to five years, but this can vary depending on where you live and the details of the accident. In California, for example, most accidents and minor violations remain on your record for three years, while DUI convictions stay on your record for ten years. In Florida, accidents generally stay on your record for three to five years, but alcohol-related violations are tracked for 75 years.

The length of time an accident will affect your insurance rates also depends on the company and the state. Some states limit how long insurers can consider at-fault accidents when calculating premiums. For example, in Massachusetts, at-fault accidents can affect premiums for only six years.

It's worth noting that if you weren't at fault for an accident, it might not count against you at all, depending on the insurance company and the state. Some states, like Massachusetts, prohibit or make it difficult for insurance companies to raise your premium if the accident wasn't your fault. However, in states with no-fault insurance, your insurance rates are more likely to go up after a crash, even if you aren't to blame, as everyone involved makes claims to their insurance policies.

Frequently asked questions