A frequently asked question by those involved in a car accident is: How much will my insurance go up? It depends on several factors, including who was at fault for the accident and where you live. Here is a look at why your insurance rates can increase (even if you weren’t at fault, in some cases) and how much of an increase you can expect.
Why Do Insurance Rates Increase After an Accident?
Knowing how insurance rates work and how they might increase after a car accident is important. When you purchase an auto liability policy from your insurance provider, they will set a price for the procedure which is generally paid in monthly, semi-annual, or annual payments, depending on the preference of the insured, and the payment plans the company offers.
Several factors go into the price of your insurance, such as:
- Your driving record. Fewer accidents and moving violations generally mean lower premiums. Note: the word premium refers to the price you pay in exchange for the coverage. States typically have a lookback period in which an at-fault accident or traffic conviction stays on the driver’s record. For example, in New York, accidents and most traffic convictions remain on the driver’s record for three years. Suspensions and revocations appear on the driving record for five years. Convictions for operating a vehicle under the influence remain on the driving record for up to 15 years. Convictions such as vehicular homicide can stay permanently on the driver’s record.
- How much you use your car. The more miles you drive, the higher your rate.
- Where you live. Some areas have higher rates of vandalism, theft, and accidents. Living in such an area will increase the price of insurance. However, some of these impacts are mitigated by having a garage to park your vehicle in rather than parking on the street, living in a gated community, and other issues that can make the insurance carrier feel more or less at risk for providing your insurance.
- Your age. Statistics show that more experienced drivers are at less risk of having an accident than young drivers are. Because of this, young drivers—particularly young male drivers (who have the highest rate of accidents)—will generally pay more for insurance than older drivers.
- Your gender. Once again, statistics show that there is less risk involved with women drivers, who have a lower rate of accidents at any age than male drivers.
- The car you drive. More expensive cars generally cost more to replace or repair if they’re involved in an accident. While a higher-priced car often results in higher-priced insurance, discounts are often available for safety equipment that often comes standard on newer vehicles.
When an accident occurs and a claim is filed, whether you’ve filed a claim to obtain repairs from your policy or someone you were in an accident with who incurred injuries and/or property damage files a claim on your liability policy, the insurance company charges a surcharge based on their assessment of the additional risk you present, based on the facts of the accident you were involved in.
Your location also significantly affects the amount of an increase you can expect to see in your insurance premiums after an accident has occurred, as different states have widely varying insurance laws. For example, in New York, your insurance company won’t assess a surcharge after an accident with no injuries and total damage of less than $2,000, while insured drivers in Massachusetts won’t face a surcharge unless the cost of the damage is under $1,000.
Forbes notes that in most states, the average increase to a driver’s premiums after an at-fault accident in which a claim was filed against a liability policy ranged between 35 and 50 percent.
However, in California, the average rate increase is 97 percent after that accident (meaning the cost of the at-fault driver’s insurance doubles when the accident is on their driving history). Drivers in North Carolina can see a 90 percent increase in rates after an at-fault accident. Drivers in Wyoming have the lowest average rate increase after an accident, at 31 percent.
In addition to state laws that define when an insurance company can assess a surcharge after an accident, location matters to insurance providers after an accident. Location can affect the number of claims due to the number of vehicles and accidents as well as the cost of claims, which can vary depending on the region. Urban areas with high health care costs tend to also feature higher insurance rates, while rural areas and areas where the cost of living is lower have lower insurance rates.
Your Insurance Carrier
Not all insurance carriers tack on the same increase after an accident as others. Many carriers offer accident forgiveness programs that waive the surcharge, resulting in minimal impact after an accident.
For example, Progressive offers two types of accident forgiveness: a small accident forgiveness program that protects the insured’s rate for a claim of $500 or less and a large accident forgiveness program that protects the insured’s rate even after a serious accident.
While the small accident forgiveness program is available for many customers from day one of their coverage, the large accident forgiveness program is only available for customers who have been insured by the company for at least five years and have not filed an accident claim against their policy during that time.
It is important to note that most accident forgiveness programs are a special endorsement that will increase the overall cost of your policy.
Do Rate Increases Begin Immediately After an Accident?
The rates you pay to your insurance provider for coverage are set when you sign the contract to begin coverage. These rates apply for the entire coverage period, generally a year, and the insurance provider can not apply an increase during the coverage period.
However, when the policy renews, the provider will assess surcharges based on changes reflected in your driving records, such as at-fault accidents and citations. Increases can also be assessed based on the number of claims you made throughout the coverage period.
What Factors Can Insurers Not Use When Determining Your Insurance Rates?
Insurance companies are not allowed to assess a surcharge that increases your rates as a result of issues that don’t involve chargeable accidents (in which you were at least 50 percent at fault) or chargeable violations (involving a traffic violation, such as a citation for speeding or failing to report an accident).
However, a number of state lawmakers across the country have introduced or passed bills limiting the type of information that can be used when determining a driver’s insurance rate, particularly as it involves charging consumers higher insurance premiums for having bad credit.
Insurance companies are not allowed to explicitly use factors such as a driver’s race or religion to determine how much someone will pay for coverage. They can use ZIP codes to set rates, assigning higher rates in areas with more traffic or property crime.
This practice often causes a racial disparity in insurance rates; a study conducted by ProPublica and Consumer Reports revealed that those living in predominantly minority neighborhoods paying an average of around 30 percent more for their car insurance than those living in predominantly white neighborhoods, even when the drivers have similar driving records. For the study, minority neighborhoods were considered to be those where at least two-thirds of the residents were non-white.
How an Attorney Can Help You Avoid a Rate Increase After an Accident
If you’ve been involved in an accident that was caused by another person’s carelessness or recklessness, you have the right to seek compensation for the expenses and impacts you incurred as a result of the injuries and property damage you sustained.
When a plaintiff files a claim against the at-fault party’s liability policy, the insurance carrier who services that policy will assign a claims adjuster to evaluate the claim to determine:
- Was the company’s insured at fault?
- How much compensation does the claimant deserve due to that liability?
It is essential to understand that the claims adjuster evaluating the claim is an insurance company employee, and their job is being performed to protect the company from having to pay high amounts to compensate for injuries and property damage caused by their insured.
Because this is how they view the claim, they will attempt to find any reason to deny the claim or reduce its value. Insurance claims adjusters often get personal injury claimants to agree to a low settlement under the notion that no additional money is available for the claim or that the claimant was somehow at least partially responsible for the accident.
Hiring an attorney can help you avoid the at-fault party’s insurance company determining that you were to blame for the accident. The attorney can help you gather the evidence and documentation needed to show how the accident occurred.
As fault is one of the biggest factors that result in a person’s insurance rates increasing, and the increases incurred due to an at-fault accident can stay on the driver’s record for years, this is an important task. Beyond helping you avoid some of the increases in insurance rates that can result from being assigned fault for an accident, your attorney can also help you value your claim to obtain the most compensation available for you, including expenses and psychological impacts.
If an accident caused by another driver has injured you, let a car accident lawyer evaluate your case for free.
Mr. Finkelstein is the Managing Partner of Finkelstein & Partners, LLP. He has become a noted consumer activist through his representation of injured individuals against corporate wrongdoers and irresponsible parties.
An accomplished litigator, Mr. Finkelstein has represented Plaintiffs in wrongful death and catastrophic personal injury cases. He has successfully handled dozens of multi-million dollar cases.