Auto insurance companies are likely to increase premiums after a claim forcing them to compensate for damages and/or injuries. Type of the claim, size of payout and designation of fault as well as your provider and state you live in will determine the percentage of premium increases. At fault accidents will increase car insurance the most at 42% on average and comprehensive claims will result in the least premium rise at about 3%. And some claims may not result in any premium increase if it is small like a windscreen repair, you have a clean record otherwise or Accident Forgiveness coverage.
According to recent studies, the average auto insurance premium increase is 42% after one at-fault accident claim with damages of over $2,000. This increases the average cost of a state required minimum liability coverage by $278 and full coverage by $846 a year. The premium increases can range from 78% in California to just 21.5% in Maryland due to different regulations in each state.
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. As a result, in states such as California, rates depend a lot more heavily on driving records. This may seem pragmatic, until you also realize that the average driver will experience three to four traffic incidents in their lifetime and they could do with other factors like credit score reducing the impact of a claim on their premiums.
Comprehensive claims are due to events beyond your control like storms, floods, theft, vandalism and accidental losses and therefore vehicle insurance premiums go up only 3% on average. However, comprehensive coverage claims go into claim count as well and can play a role in substantial premium increases when there is an at fault accident claim as well in the last year.
If you claim on a third-party automobile insurance company because someone else was at fault, your premium won’t be affected. If you claim on your own Collision coverage for an accident that was someone else’s fault, your premium will still increase because your insurer ended up paying for it. However, if your insurer can claim back the money they paid to you from the at fault driver’s insurer at a later date, you won’t see a premium increase again.
Motorists with Accident Forgiveness coverage may not see any premium increase after the first accident even if they are at fault as it is bought for exactly this purpose. However, motorists may need to be accident and traffic conviction free for five years to qualify for Accident Forgiveness in the first place and it only helps for the first accident. Often, there is an additional auto insurance premium to pay for it too.
After a claim, the rates will remain affected for at least three years depending on the company and can be as much as five years with some providers. The effects would be higher for the recent accidents and premiums usually come down slightly if there are no other claims or traffic tickets in the next 12 months.
Two accident-related property damage or injury claims in one year will double auto insurance premiums. Multiple claims in the last three years and claims with a combination of traffic tickets can cause substantial premiums increases. At times, carriers may refuse to offer renewal terms or don’t offer any quote for new applicants. For example, if motorists cause injuries in an at fault accident and this results in reckless driving conviction, their premiums would at least double. And some companies may not quote or offer renewal.
Paying small claims out of pocket may be a valid strategy to avoid large premiums increases and getting into trouble due to the second claim. For example, if you scrape your car when coming out of a garage or a parking lot and the damages are under $1,000, you may consider paying it out of pocket for three key reasons.
First of all, it would be a dreaded at fault vehicle insurance claim. Secondly, you may only get paid $500 if you have a $500 deductible. Your premium is likely to increase more than $500 (average $846) only in the first year and it affects the rates for at least 3 years. Finally, you may even find it hard to find auto insurance if you have another accident and traffic violation conviction. One traffic incident can be explained as unlucky but two can only be taken as signs of seriously dangerous driving.
After a claim, you will see how much it affects your car insurance premium at the next renewal. If it comes expensive you can still shop around and find lower prices because each company looks at claims differently. For example, some companies may not increase their rates as much if you have a good credit score and otherwise clean driving record. In any case, get a few quotes and compare your options.