No matter how cautious you are when driving, accidents happen. In fact, about 6 million motor vehicle accidents happen in the U.S annually, according to the National Highway Traffic Safety Administration (NHTSA).
That's why you can't risk getting involved in a car accident without insurance, as it can help you pay for vehicle repairs, medical bills, and other damages, depending on your coverage level.
But here's the kicker. While car insurance may provide financial protection after an accident, most car insurers may increase your premiums post-accident, even if you weren't liable.
So why does car insurance go up after an accident? Keep reading to discover what causes premium increases, how long they last, and how to reduce their severity.
Understanding the Impact of an Accident on Insurance Rates
Your car insurance rates will generally increase if you're responsible for an accident. The increase may vary significantly depending on your insurance company, driving history, and the accident's severity. State regulations and accident forgiveness programs may also impact your rates.
At-Fault vs. Not-At-Fault Accidents: What’s the Difference?
An at-fault accident is one where one party or more parties are considered responsible. If you're deemed at fault for an accident, your insurance must cover the other party's vehicle repairs, medical bills, and other losses caused by the accident.
In contrast, a not-at-fault or no-fault accident is one where every party must file claims with their respective insurance providers, regardless of who was culpable for the incident. Unfortunately, a no-fault accident's effects on your insurance rates can be considerable.
In fact, even if you aren't to blame for an accident, your rates could rise by 10% or more, according to a study by the Consumer Federation of America (CFA) conducted in 2017, the latest year with available data.
While this may seem unjust, no-fault systems are designed to prevent the blame game after accidents and speed up the claims process.
How Long Does an Accident Affect Your Insurance Rates?
A car accident can stay on your insurance record for three to five years. As a result, accidents generally affect insurance rates for up to five years.
The exact duration may vary, depending on your insurance policy, driving history, state regulations, the accident's severity, and whether you were at fault. For instance, certain traffic violations, like a DUI or DWI, can affect your rates longer.
Key Factors That Influence Post-Accident Rate Increases
No two car insurance claims are the same. While your insurance premium might rise exponentially in some cases, in most cases it might just increase slightly after a wreck.
Why does your insurance increase, and why are there disparities across claims? Some of the factors that influence raising rates after an accident include:
- Accident severity and claim amount: A fender bender doesn't compare to an accident in which a vehicle is totaled. Minor accidents generally result in lower premium increases than major ones, as insurers factor in the higher claims payouts when adjusting rates.
- Driving record: A history of multiple accidents, regardless of fault, may make insurers flag you as a high-risk driver, potentially resulting in higher insurance rates.
- Geographical location: You may pay significantly higher premiums if you reside in an accident-prone area.
- Credit score: Most states allow insurance providers to use credit scores when calculating insurance rates. A low credit score can result in higher rates.
What Is Accident Forgiveness and Who Offers It?
An accident that leads to a premium increase can strain your finances. But here's the good news: Some insurance companies offer accident forgiveness programs.
Accident forgiveness is an optional coverage you can add to your policy to prevent your car insurance rates from increasing after your first at-fault accident. Some insurers may offer the feature for free if you have a clean driving record, but typically it's an add-on. Accident forgiveness rates vary across insurers.
However, availability varies based on state and insurance provider. Contact your insurer to find out if your policy includes accident forgiveness. Popular insurance companies that offer the feature include Progressive and Liberty Mutual.
Tips for Minimizing Insurance Costs After an Accident
If your insurance rate spikes after an accident, you can still take measures to bring it down, even if you don't have accident forgiveness:
- Raise your deductible: Increasing your deductible will typically lower your premium. Just keep in mind you'll pay more out of pocket if you file a future claim. Be sure you have enough money to cover the cost of repairs and replacements if you choose this option.
- Bundle policies: Some insurers may lower your insurance rate if you bundle your car insurance with another product, like homeowners or renters insurance.
- Maintain a good credit score: Improve your credit score by paying bills on time and resolving any issues on your credit report.
- Shop around for quotes: Different car insurance companies offer different rates. Compare quotes from multiple providers to find the one that offers the most bang for your buck.
Taking pictures and videos of the accident and immediately contacting your insurer are also important steps you should take. This helps ensure you aren't unfairly held responsible after an accident so your car insurance rates don't go up. If you aren't at fault, this can prevent you from paying higher premiums for car insurance after an accident.
Compare Your Options and Take Control of Your Rates
An accident that causes a massive bump up in your insurance rates can dent your finances. But this doesn't have to be the case. Get a free, custom quote on our site today to find affordable car insurance, even if you were responsible for an accident.