How Much Does a Claim Affect Car Insurance?

The short answer is, quite a lot. The real cost of an accident is much more than just the immediate auto insurance premium increase after claim. The total expenditure for auto accidents in the United States for 2013, was $871 billion. This amount includes the medical, lost productivity, legal, emergency services, administration, workplace, present and future quality of life valuations and property damages. It equates to more than 6% of the gross domestic product of the U.S.. They cost the economy almost $3000 for every person in the country, according to iii.org. Of course they are borne by multiple players including the driver, victim, carrier, employer and even family.

How Does a Claim Affect Car Insurance?

A recent study however showed, that even the immediate upfront costs can be very significant, depending on which state you live in. The national average for auto insurance increases after just one claim of $2,000 or more was a surprising 44%. Not all incidents are equal and certain losses raise it by more than others.

The biggest reason that it can range from a high in California of 78% to a low of just 21.5% in Maryland is simply different regulations. California, Massachusetts and New Jersey have consumer protection laws that do not allow insurers to consider other factors such as credit scores, age, marital status, homeownership and more. Depending on where you live, these factors may be prohibited for calculating premiums. As a result, in states such as California, rates depend a lot more heavily on driving record. This may seem pragmatic, until you also realize that the average driver will experience three to four traffic incidents in their lifetime with at least one involving the most expensive of them all, bodily injury.

Comprehensive claims, those that do not involve an auto accident or bodily injury, only register a 2% increase in premiums. However, registering a comprehensive and an injury in the same year may still have catastrophic results.

Injury & Property Losses

Bodily injury claims incur the highest car insurance rise at 48% nationally and a whopping 89% in California, and 41% nationally for property damage. Filing just one loss in certain states can be more costly in the long run than actually paying for it out of pocket. An 89% hike with an average premium expenditure of $782 in 2013, according the NAIC, would equate to $782 + $696 (increase) = $1478 annually for approximately three to five years. This would equate to almost $3,500 additional payment over five years.

It may not be a better situation for states with the least premium rise. Michigan, second lowest in 2015, was the most expensive to buy auto insurance. A rate hike of 26% would equate to a $712 per year, almost the same cost as California.

When to Pay Out of Pocket?

How much does insurance go up after an accident? The answer is clearly laid out above. Now drivers need to be careful when they call their insurer following a traffic incident. Coverage needs to be considered a fail-safe for catastrophic events.  it may not be in your best interest in the long term to ask compensation for a small damage (under $4,000). The main reason is that in the long run, it may cost more than it would in simply paying the damages out of pocket. It all depends on regulations, deductible, and the potential price changes.

The best option would be to use this calculator and see if it is worth in your location and situation. Also, remember that another accident could make it very difficult. One traffic incident can be explained as unlucky but two can only be taken as signs of dangerous driving.

Of course, after a recent loss, during next renewal period it would be wise to conduct quotes comparison to ensure you are still getting the best rates available. This would be a time that you see large price changes and therefore a good time to look at lower quotes. At times, swapping carriers may be the best option.

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