When Auto Insurance Providers Can Raise Rates After an Accident

Auto Insurance, Insurance
When Auto Insurance Providers Can Raise Rates After an Accident

After checking for injuries, one of the first things many of us worry about when we’ve had a car accident is whether our auto insurance provider will raise our rates — and we have good reason to worry.

But an insurance increase after accident is not a sure thing. Here are the factors that determine the financial pain.

Accident severity

The severity of your accident is the “foremost factor” impacting whether it will boost your premiums, according to insurer Esurance. Bigger claims payouts are more likely to result in higher rates at renewal time.

Fault

If you were found to be responsible or partly responsible for an accident, your insurer is more likely to raise your rates.

If your accident was another driver’s fault and you make a liability claim through his or her insurance company, that certainly won’t affect your rates. Even if you go through your auto insurance provider by making a collision claim, your insurer will likely recoup the money from the other driver’s insurer. You shouldn’t see a rate increase, provided the other company reimburses yours.

If the driver who was at fault doesn’t have insurance or doesn’t have enough coverage to pay for your damage and/or injuries, you could make a claim through your collision, uninsured motorist coverage, personal injury protection or medical payments coverage. Depending on the type of claim you make, your state’s laws and your insurance company, this could cause your insurer to raise your rates.

In no-fault states, your insurer pays for most injuries, no matter who was at fault. So, if you file an injury claim, you might also end up paying higher premiums. The 12 no-fault states are Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania and Utah (plus Puerto Rico).

Driver history

If you had a clean driving record before the accident, your insurer is less likely to raise your rates. If, on the other hand, you had previous accidents and payouts, you can expect to pay more for your coverage.

“Rates usually jump when a company considers a driver to be higher risk, and a driver with decades of safe driving experience doesn’t necessarily become high risk after a little fender bender,” Esurance writes.

Accident forgiveness

Many auto insurance providers now offer “accident forgiveness,” the whole point of which is to guarantee that you won’t get socked by a rate increase. That’s the good news.

As Geico puts it: “Accident forgiveness is like having a free pass on your first at-fault accident.”

The bad news is that you don’t get a second free pass, at least not for several years. And to get that “free pass,” you generally pay a higher premium from the start.

Now what?

If your auto insurance provider decides to raise your rates after an accident, the boost would come with your next policy renewal and last about three years, although your premiums may come back down sooner.

Remember that each company has its own guidelines for rate increases after accidents and pricing car insurance quotes in general. So a notice of a rate increase from your current insurer may be a signal to shop around for new quotes.

Aubrey Cohen is a staff writer at NerdWallet, a personal finance website. Email: acohen@nerdwallet.com. Twitter: @aubreycohen.


Image via iStock.