Everyone knows that a car accident can damage your insurance premiums just as severely as the accident damaged your car. Average premiums can increase by thirty percent or more after an accident. So, how is all this calculated?
Any quote for car insurance will begin with your driving record and the make and model of your car. Essentially, your driving record tells the company how risky a driver you are, while the make and model of your vehicle give the company information on how expensive repair and replacement will be if an accident does occur.
Type of Vehicle
The more costly the vehicle is, the more expensive the insurance will be. This fact is simply reflective of the higher cost of repairs to a more expensive car. Of course, the more expensive, higher horsepower vehicle is often driven by younger, less risk-averse drivers, also contributing to the base rate. Sports cars have their own unique sports car insurance policy, which can be both expensive and difficult to obtain.
If you have had accidents or serious traffic violations, your insurance rates will be significantly higher than the base rate. The insurance company will ask about all of these items on the insurance application and verify them by checking your driving history. If you have recent citations or accidents, be prepared for higher premiums.
Where and How Much You Drive
Insurers will also look at where you drive and store your vehicle and how much you drive it. Urban drivers generally pay higher premiums than those in rural areas due to a lesser likelihood of vandalism or theft. If you drive significantly less than average, thus reducing the opportunity to get in an accident, you will also save on premiums.
Age and Gender
Statistically, women and older people have fewer accidents than men and those under 25. These facts are why the insurance rates for your teenage son seem astronomical. An 18-year-old pays nearly two and one-half times what a 25-year-old pays, and once they turn 26, the premiums will go down by a further 11 percent.
So, What Does An Accident Do?
Any car accident, even one that is not your fault, could increase your insurance premiums. Any adverse factors present such as being at fault or under the influence will only compound the increase.
The average increase shown by each state for a driver with one at-fault accident over a driver with a clean history ranges from 73 percent in California to 8 percent in Texas. The premium increases also vary by company and range from a low of 10 percent with State Farm to a high of 36 percent with Amica. In other words, there will be anywhere from a significant to a catastrophic increase in the amount of your premium. And, it won’t be for just one year.
How long an accident impacts your rates also varies from state to state.
In California, most accidents and minor violations affect your rates for three years. More serious issues can affect them for up to 10 years. Even if you weren’t at fault, if the damage was more than $1,000, you must report the accident, and it will impact your insurance.
In Florida, on the other hand, a crash hits your record only if you were issued a citation. Most accidents will stay on your Florida record for three to five years, but any with alcohol involved stay on for 75 years—basically the rest of your life. Massachusetts limits consideration of an at-fault accident to no more than five years.
The insurance company may also choose how long it will factor an accident into your premiums, so long as it does not exceed the state maximum. They address these issues by asking if you have had an accident within so many years and, separately, whether you have had a DUI, usually for a more extended period.
The accident will probably not affect your rates if you were not at fault (in an at-fault state). But, that again depends upon the state and the company. USAA, insurer to the military and their families, says if they agree you are not at fault, your premium will not be affected.
Generally, any premium increase will only last for three to five years, as always, depending on the state and the company.
What About No-Fault States?
In the 12 no-fault states, not only are the average premiums significantly higher to start with, but any accident, even one at which you were not at fault, will increase those already high premiums. Since you’ll file a claim, in most cases, against your own policy, fault does not matter. The insurer will have to pay out and will, therefore, likely raise your premiums.
Here, too, however, the states vary. Massachusetts, for example, prohibits any increase in no-fault premiums unless you were more than 50 percent at fault. In its no-fault system, New York allows insurance companies to raise the premium only if the insured was at fault and there were injuries or damages greater than $2,000.
Which Claims Hit the Hardest?
Any accident that involves alcohol will hit your premiums severely. Often, your insurer will drop you, which makes getting insurance at any premium rate extremely difficult. Since the DUI is arguably intentional and not negligent conduct, the company may attempt to decline to cover your losses at all. If the insurer does keep you on, or you are dropped and get another policy, you will probably face drastically higher premiums.
Other claims that can significantly affect your premium are at-fault accidents where the accident causes you injury, at-fault accidents where the car is totaled, and uninsured driver claims.
Accident Forgiveness Programs
Many insurers offer drivers with a clean history an accident forgiveness program that allows for at least one accident without a rate increase. There is usually an extra premium charge for these programs, and drivers must qualify for them. When getting a new policy, see if they offer a program and, if so, how to qualify for it.
What to Do
In the end, unless you live in New Hampshire or Virginia, you need car insurance if you want to drive. So, if an accident premium increase hits too hard, you may need to shop for other insurance policies. If someone else caused the crash that resulted in higher premiums, work with a car accident attorney to recover the compensation you deserve to help pay for it.