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How Does a Car Accident Affect Your Car Insurance?

  March 1st, 2019  By Maggie Overholt

5 Things You Should Know About Accidents and Car Insurance Rates

1. It’s True, Accidents Affect Your Car Insurance Rates

There are plenty of good reasons to drive carefully (you don’t need us to tell you that), but the fact that low car insurance rates depend on safe driving habits is a biggie. How much do rates depend on your record? Quite a bit, according to a 2017 study from Quadrant Information Services that pinned the average rate increase for a $2,000 claim at just over 44%. That’s not just a ding on your record, it’s a ding to your bank account, too.

On average, a collision that costs your insurer $2,000 in claims could raise your rates by around 44% next time you renew your insurance.

2. But Rates Don’t Always Go Up After an Accident

It’s true that accidents affect car insurance premiums. In fact, your driving record is one of the two biggest factors that insurance companies consider when they’re setting rates. This is because past accidents — especially if they were your fault — are a fair indicator that the company might have to pay out claims on your policy in the future.

That said, rates won’t always go up if you file a claim. Insurers are often pretty reasonable when it comes to what does or doesn’t merit a premium increase. If you’ve maintained a clean record over the years, you’re a lot less likely to get penalized for things like minor fender benders and not-at-fault collisions.

Your Rates Will Probably Go Up After an Accident If…

  • You’re found to be at fault for the collision
  • The cost of damages is significant (in the thousands)
  • You’ve filed more than one claim with your insurer
  • You’ve filed claims with other insurers within the past three years
  • You live in a state with no-fault auto insurance laws, where your own insurer must pay for your injuries no matter who caused them

Your Rates Might Not Go Up After an Accident If…

  • The other driver is found to be 100% at fault for the collision
  • It’s your first incident, and your auto insurance policy includes accident forgiveness
  • It’s a minor incident, and you have a long history of safe driving
  • It’s a minor incident, and you’ve been with your insurer for a number of years without filing a claim

3. Accidents Follow You for 3 Years, Even if You Switch Insurers

If your rates have gone up because of a collision, you might be wondering how long you’ll be saddled with a higher premium. The short answer? Three years. That’s how long most companies will count a past incident against you when determining rates.

The next question that comes to mind is usually “Well, what if I switch insurance companies?” Unfortunately, the answer is still “three years.”

Here’s the thing: Every property claim you file (whether for auto or homeowners insurance) gets logged on your personal insurance report card. This record, known as a CLUE report, goes back seven years and is accessible to any insurance company you might apply for coverage through. So whether or not you choose to stick with your current insurer, claims you’ve filed with them will still affect your rates for the standard three-year period.

4. But You Can Protect Your Wallet with Accident Forgiveness

There’s no other way to put this: It’s a real bummer that rate hikes can affect you for three years after a collision. That’s a long time to be shadowed by what was likely a split-second slip up. Fortunately, car insurance companies realize that accidents, in the purest sense of the word, do happen. That’s why they offer forgiveness programs.

Accident forgiveness protects you from a premium increase after your first collision if you have an otherwise-clean driving record.

If your policy includes accident forgiveness, you get one get-out-of-jail-free card; rates won’t go up after your first at-fault accident. Each company has unique parameters around customer eligibility, price, and the kinds of accidents that are excusable under this program. However, they’re all aligned on the fact that you must have a pretty spotless driving record in order to qualify for accident forgiveness.

5. And Yes, You Should Tell Your Insurer About Every Accident

After a minor collision, it’s not uncommon to wonder whether you should file an insurance claim at all. Maybe the total damage amount is relatively close to your deductible, and you can comfortably pay it yourself. Maybe you’re worried about a rate increase. Maybe you’d simply prefer to avoid the hassle.

Contact your insurance company any time you’re involved in a collision with another driver — even if damages seem minimal.

Whether or not you plan to file a claim, it’s important to let your insurance company know about any collision you’re involved in with another driver. There are two big reasons for this.

First, even if you don’t file a claim, the other person might decide to sue for damages. If your insurance company hasn’t been filled in on the details of the accident, it will be harder for them to represent you in that scenario.

The second reason to report a collision right away is that damages might be worse than they first appear. You may think your car (or the other driver’s) is in pretty decent shape at first sight — but after a closer inspection, find out that expensive repairs will be necessary. If your insurance company wasn’t informed about the accident in a timely manner, they might not be willing or able to pay out on your policy.

What’s Next?

  • What can I do to lower my rates? If your insurance rates have spiked because of an accident (or were simply high to begin with), you’re probably looking for ways to bring costs back down. Check out these eight tips for finding the best value on your car insurance.
  • Where can I find a good deal on car insurance? Along with rate-saving programs like accident forgiveness, your car insurance provider should offer plenty of discounts, personalized coverage, and strong customer service. Start your search with our review of the best cheap car insurance companies.

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