Two powerful factors that can easily raise your auto insurance premiums other than changing the terms of coverage are accidents and claims. Knowing how accidents and claims work in your insurance will enable you to manage your costs and maintain good coverage. Several factors come into play: the severity of the accident, who was at fault, how often claims are filed, and, of course, specific policies from your insurance provider.
Probably the most immediate and most visible effect of filing a claim after an accident is increased premiums. Should you be involved in an accident, particularly if it is your fault, your insurance company may consider you a higher risk when your policy comes up for review. Hence, your premiums may rise. The amount of increase varies, depending upon the severity of the accident, the cost of the claim, and any previous driving history. In general, the more serious the accident or large the payout of a claim, the greater your premium increase will be. Some insurance companies offer Accident Forgiveness, a feature that can help soften the effect an accident has on your premium.
With this feature, if you have it and it’s your first accident, an insurer may “forgive” the incident—in other words, your rates won’t rise. Normally, accident forgiveness is available to drivers with clean records and often with conditions such as being a long-standing customer attached. While this can be a valuable benefit, it’s important to note that it typically applies only to the first at-fault accident and isn’t available in every state. At-Fault vs. Not-At-Fault Accidents also play an enormous role in knowing exactly how your insurance is affected.
While an accident that is your fault can result in increased premiums since you are a higher risk to the insurer, a not-at-fault accident shouldn’t cause an increase in premiums, especially if damages were totally covered by the other driver’s insurance. However, your rates can increase even in not-at-fault accidents if you have a number of incidents within a very short period of time. That’s because frequent claims can indicate to them that you’re more likely to have another accident in the near future. In conjunction with these factors, another aspect is Claims Frequency.
It refers to the frequency at which you file a claim—irrespective of the amount—with the insurance companies. In addition to this, frequent claims could lead to higher premiums, even if the damages are minor in nature. Insurers may impose more severe restrictions or higher deductibles for customers they consider risky. Therefore, it sometimes makes sense to ensure that the trouble of filing a claim justifies the possible increase in your premiums, especially when you can afford minor repairs without indemnification. Non-Renewal or Cancellation of Policy: Another, more serious consequence, especially of having more than one claim or having a large claim.
Your insurance provider may view you as too much risk and refuse to renew your policy or even cancel it. It may then become hard to secure a new one, and costly, since others will equally treat you as a higher risk. In that regard, it is pivotal to maintain a clean driving record, to file claims only in circumstances where it is necessary, and to consider paying out of pocket for minor damages. Another consideration is Impact on Future Insurance. In most cases, accidents and claims do get recorded in your insurance record. Other insurance providers may request this information to help calculate your premiums when you apply for new insurance. Having a record with accidents or too many claims increases your chances of not getting the cheapest possible premium. However, the impact of an accident or claim erodes over time, especially if you have kept your record clean since then.
In summary, accidents and claims tend to have a big impact on your car insurance premium and available coverage options. Keeping an understanding of what does and does not cause the change to occur will help in deciding when one should make a claim and how he or she manages his or her insurance coverage effectively. Maintaining a clean driving record and strategically filing claims will help minimize the impact on your insurance costs.