Insurance is a complex topic, particularly when filing a claim and waiting to see how much your premiums will increase. As a car owner, you might wonder how much your car insurance will increase after an accident.
An accident doesn’t just lead to physical or property damage. It can also significantly dent your finances when your car insurance premiums rise. Depending on factors such as the at-fault party, an accident could increase your rates for years.
In such cases, it’s important to seek the guidance of a car accident lawyer who can help you navigate the legal aspects and insurance claims related to your accident.
Understanding Car Insurance Rates
Car insurance offers financial protection against bodily or property damages due to traffic accidents, theft, or other unforeseen circumstances involving your car. These policies typically provide two types of liability coverage for circumstances where an insured driver causes an accident that harms others.
Bodily injury liability coverage compensates the injured party for the financial and psychological consequences they incur in an accident. Property damage liability coverage relates to the cost of repairing or replacing a vehicle or other property, such as a private fence, that sustains damage due to the insured driver’s carelessness.
While all states have laws requiring drivers to obtain minimum liability insurance coverage to operate their vehicle on the roadway legally, some states may require or provide other types of coverage at the insured’s request.
Drivers in no-fault states, for example, must generally obtain personal injury protection (PIP) coverage to pay for their medical treatments and lost earnings or those of their passengers and other named drivers on their policy.
In all states, drivers can choose to obtain comprehensive and collision coverage. This coverage helps the insured driver repair damages to their vehicle that occur due to an accident or incident.
Collision coverage provides the necessary funds to repair or replace a vehicle if another vehicle damages it in an accident.
Comprehensive coverage provides funds to repair or replace the vehicle if it sustains damage due to a natural disaster, theft or vandalism, or an accident resulting from an animal on the roadway.
Several factors determine your car insurance rates. An insurance company may consider your age, gender, location, driving history, the type of car you drive, and even credit score when setting your premiums.
A poor driving record with multiple speeding tickets or accidents can lead to higher rates. The logic behind this is straightforward—insurers will charge more to cover the potential payout costs if they consider you a risky driver.
Vehicles more than five years old are generally cheaper to insure than new vehicles because they’re not as high value and are less expensive to replace.
Role of Accidents in Car Insurance Rates
Car accidents play a significant role in determining car insurance rates. If you have had an accident, insurers may see you as a higher risk, leading to an increase in your premiums.
There are typically two types of accidents that insurance companies recognize—at-fault and not-at-fault accidents. An at-fault accident means that you were the primary cause of the accident, which will undoubtedly increase your rates. Not-at-fault accidents, which someone else caused, can sometimes increase your rates, depending on the insurance company’s policies.
When an accident occurs in a no-fault state, such as Michigan, injured individuals can seek compensation for medical expenses and income loss relating to the injury through their PIP coverage. This coverage is available regardless of fault.
The PIP coverage individuals carry, however, is typically small compared with the significant expenses car accident victims face. When this coverage runs out, or for a serious or disabling injury, the injured party can seek compensation from the at-fault driver’s bodily injury liability coverage. They can also claim to cover the cost of repairing or replacing the vehicle from the at-fault party’s property damage liability coverage.
When someone files a claim against a driver’s liability insurance coverage, the insurer assigns it to a claims adjuster. The claims adjuster is an employee or contractor of the insurance company whose role is to determine three things.
The first is whether the insured’s policy covers the accident. If it does, the adjuster evaluates the case details to determine if the insured driver was at fault. If they were, the adjuster must determine what the insurance company owes to the claimant.
The types of information that the adjuster can use in their investigation include interviews with the involved parties, the official police report from the accident, and any citations the driver received during the accident investigation.
The claims adjuster will evaluate the details of the incurred physical and property damage, including the costs associated with treating the injury and repairing the damage the vehicle sustained. Insurance companies generally apply a surcharge and increase rates when the policy renews after the accident.
By How Much Does Car Insurance Increase After an Accident?
The percentage increase in your insurance rate after an accident varies considerably based on several factors. Insurers often apply an increase of 20 to 50 percent.
The rate increase after an at-fault accident is particularly high in California, where rates increase by more than 100 percent after an at-fault accident, and in New Jersey, drivers generally see an increase of around 80 percent.
Key factors influencing the rate increase include the accident’s severity, the cost of the claim, whether you were at fault, and your prior driving record. A minor accident with minimal damage, for instance, may result in a smaller premium increase than a severe crash that causes significant damage or bodily injuries.
Different types of accidents can result in varying rate increases. Driving under the influence (DUI)-related accidents typically lead to more substantial rate increases than non-DUI accidents due to the severe risk and legal implications involved. A study revealed that drivers with a DUI on their record saw their insurance increase an average of $124 a month.
Drivers with DUIs on their driving history commonly have to obtain SR-22 insurance. SR-22 refers to a certificate of financial responsibility that proves the driver has obtained the minimum level of insurance their state of residence requires. Insurers submit this certificate to the state for their insured customer.
DUIs appear for a full seven years on the driver’s driving record or even permanently in some cases.
For How Long Does an Accident Increase Your Insurance Rate?
Once your premium increases due to an accident, you enter what the insurance industry refers to as a penalty period. This period lasts for three to five years, depending on your insurance company’s policies and the legal regulations in your state.
U.S. News & World Report noted, however, that information about your accident can appear on the reports insurers use to determine your rates, including the Comprehensive Loss Underwriting Exchange, for up to seven years.
Several factors influence the length of your penalty period. The severity of the accident, the cost of the claim, and your driving history all factor into how long you’ll see increased rates.
To reduce the penalty period:
- Good behavior on the road: Many insurance companies offer good driver discounts to those who have gone for some time without a ticket or accident. Even if you have an accident, providing that you aren’t at fault, you can often receive a discount of up to 20 percent or more.
- Adding safety features to your vehicle, such as collision warnings, anti-theft devices, rearview cameras, or parking sensors. New cars have many of these features; however, they are generally expensive to insure, as they can be costly to replace if an accident occurs.
- Completing a defensive driving course: Many insurance companies will reduce your rate if you complete additional driver’s education courses. Defensive driving courses usually focus on topics such as road safety techniques, how to avoid accidents, and knowledge of your state’s traffic laws.
- Request accident forgiveness: While participating in your insurer’s accident forgiveness program will not retroactively eliminate increases in your premiums from previous accidents, the option can help you avoid increases due to accidents in the future.
- Switching to another insurance provider: Rates vary among insurance providers, and you can potentially find a better premium by looking around. As Money explains, it’s important to look beyond the premiums to determine which company offers the most coverage and lowest deductible in addition to affordable rates.
- Improve your credit: Depending on the state you live in, your credit can have a bearing on the amount of insurance you pay. Insurers commonly regard drivers with poor credit as higher risk than those who live and spend responsibly. As NBC News reports, while some industry experts argue that using credit histories as a factor when determining rates perpetuates inequalities in the system , and states seek to remove credit from the rate calculation, many insurers still use a credit-based approval process.
- Increase your deductible: The deductible is the amount of the claim you’re responsible for paying before your insurance coverage kicks in. If you have an auto insurance policy with a $250 deductible, for example, this is the amount you will pay before your insurer provides coverage. Raising that amount to $500 means that you’re responsible for paying for more of the out-of-pocket damage when a collision occurs, but it also generally means that your premium will be lower.
- Consider changing to a different car: The make and model of the vehicle you drive also come into play when determining your insurance rate, as some cars are more expensive to repair. Some cars also have higher safety ratings, so they will likely sustain less damage in an accident.
- Even if you were not at fault for an accident, you could still experience a small, temporary increase in your premiums, particularly if your insurance paid for some of the expenses for property damage or bodily injury you incurred. When the insurer pays out, they will often attempt to recoup the expenses through a temporary increase in your premium.
Your premium can also increase if the at-fault party does not have sufficient insurance coverage to compensate your claim and you file against your uninsured/underinsured motorist coverage.
If the area where you live has a high rate of car accidents, insurance companies will often increase the rates on all drivers living there, even if they haven’t been in an accident, simply because they are at higher risk.
Knowledge Is Valuable When It Comes to Car Insurance
Understanding how car insurance premiums rise after an accident is vital for every driver. Accidents can significantly increase your insurance costs, but by understanding at-fault and not-at-fault accidents, the role of comprehensive coverage, and ways to mitigate the damage, you can navigate this scenario more effectively.
If you’re a victim of an accident due to another driver’s negligence, an experienced personal injury lawyer can provide information about the role of insurance in compensating you for the financial and psychological consequences of your injury.
A lawyer can also explain how the personal injury claims process works and the services they provide when handling your claim.