Will An Auto Accident Spike My Insurance Rates?

Customers often tell us they aren’t filing a claim with their insurance company because they fear their rates will increase. Fact is, if the accident was reported to police, the insurance company will eventually find out from public record. Also, if the other driver involved in the incident decides to file, it will no longer be your little secret.

 

The answer to the questions is ‘perhaps’. Your insurer considers many factors before deciding to increase your rate, and sometimes it may stay put exactly where it was before your fender bender.

It’s no myth – auto insurance companies indeed DO have a “surcharge schedule”, or predetermined premium increases that occur if you cause a wreck. Key phrase: YOU cause.

 

Factors For Premium Increases:

They take multiple factors into consideration when determining if a claim should result in an elevated premium.

 

  1. Severity of the incident – cost of the claim is often the foremost factor
  2. Driving history – was this your first or second accident? If you haven’t had an accident or ticket in decades, a minor mishap will likely leave you monetarily unscathed.
  3. Age bracket – teens are statistically accident-prone, etc.
  4. Who’s to blame – you shouldn’t have to pay for misfortune. If it’s not your fault, you’re safe.
  5. Your policy’s details – does yours include “accident forgiveness”?

How MUCH Will It Change?

Surcharge amounts vary greatly from company to company, as well as how they determine those rates when a claim is submitted. Many companies follow the Insurance Services Office’s (ISO) standard of increasing a premium by 20-40 percent of your base rate. A base rate is the average rate charged in your state before discounts and other adjustments, plus the insurance company’s claims-processing fee. To break it down, your rate would increase 40 percent for a single-car policy or 20 percent for the first two vehicles on a multi-car policy.

For example, say you insure two cars at a premium of $300 each and the insurer’s base rate is $400. After an accident, you may get a surcharge of $80 (20 percent of $400) on both, so your total surcharge would be $160 — an increase of about 27 percent on the policy.

Protection Against UNREASONABLE Surcharges

Motorists in Pennsylvania may not be surcharged or have their policy non-renewed if the claim(s) resulting from the accident(s) in the preceding three years do not add up to more than the current threshold amount after payment of any deductible, or if the insurance company is reimbursed for at least 60 percent of the total amount of the paid claim. This threshold applies to any person injured or property damaged. Effective July 1, 2011, the Insurance Department has set the threshold to $1,450.

Inquire BEFORE Buying A Policy

While your policy may seem like a bargain when you’re shopping around, a high surcharge level could send your rate through the roof after an accident. We recommend you inquire with your agent about accident forgiveness and request a copy of its surcharge schedule, also called an “insurance point plan” – before  you buy. Also ask, “If I have an accident within the next year, what would my end result premium be without discounts and how long would that surcharged premium last?” They may not want to answer – you may have to insist. Also, beware! Some companies penalize you for moving violations as well.

Safe Drivers = ‘Safe’ Rates

All things considered, keep in mind that car insurance companies LOVE safe drivers! These drivers save them tons of money every year. It’s when you’re classified as higher risk that these factors come into play. They also love loyal customers. If you’ve had a clean record for 20 years with them, you’ll probably find them being quite fair after a minor accident.

Rate Hikes Are Temporary

If you find your premium spiked after a mishap on the road, don’t worry – it’s temporary. The surcharge will drop after a predetermined length of time, which also varies. (Of course this is contingent on no additional accidents!) But, if your insurance goes up much more than the estimated 20 percent, it might be time to get a new insurance carrier.