When you’re in an auto accident and considering filing a claim, you may be concerned that your insurance carrier will raise your premium rates. That concern can be a deciding factor on if you’ll file a claim or decide to pay for the damage out-of-pocket. CBS Money Watch reported that drivers who made just one claim ended up paying an average of 41 percent more for car insurance. Accidents represent risk, and insurance rates are largely based upon your risk factor. If you’re on the fence about whether you should file a claim or not, take the following into consideration.
Who’s to Blame?
If you rear end another car that’s stopped at a traffic light, then it’s safe to say that you’re at fault. That’s considered a “clear” incident to the insurance company when determining fault. Likewise, if you’re in the vehicle that was rear-ended, then you wouldn’t be considered at fault. Insurance companies consider fault when assessing claims, and if you’re not at fault, you shouldn’t see a spike in your premium.
Of course, not every accident is a clear accident. Insurance companies take into account the rules of the road, where the damage is located, driver statements, witnesses (if applicable), police reports, and other factors (such as weather) when trying to piece together the facts of an accident to determine what happened. If you’re determined to be at fault, it’s likely that your rates will increase for both the property damage to the other vehicle(s) and/or property (such as a fence or guardrail), as well as the damage to your vehicle if you’re going to file a claim under your collision insurance. If you’re at fault, and you can afford it, you may be able to negotiate with the other parties to pay for their damages. If the other party files an insurance claim through their own carrier, that carrier in turn is likely to subrogate through your carrier to recoup the costs. In some cases, you may be able to negotiate with the other party’s carrier to pay for the damages and avoid them subrogating through your carrier, which would likely affect your premium.
In any case, whether you are determined to be at-fault or not, be vigilant in reviewing your premiums. A recent New York Times article found that some drivers had their premiums increased for accidents in which they were not at-fault. If you believe your rates were unfairly surcharged, you may be able to appeal this decision through your insurer or through the state’s insurance commission.
One last thing on fault. You may have heard the term “no-fault insurance.” That’s a bit of a misleading term. No-fault insurance means that if you’re in an accident, your own auto insurance provider is responsible for paying medical bills, missed wages due to injuries, and additional loss claims.
The Severity of the Incident
Obviously, backing into an object and putting a small ding on your rear bumper is much different than hitting something and crumpling the hood of your car like an accordion. The severity of the incident and the cost of the claim is going to be the determining factor in whether the claim will increase your rate.
If you’re at-fault, the insurance company might not be the only deciding factor in determining your premium increase. Your individual state may factor in as well. For example, Massachusetts car insurance law differentiates between “major” and “minor” accidents. The threshold between the two isn’t very high. Any claim over $2,000* is considered a “major” accident. This information is submitted to the Merit Rating Board, the at-fault accident is added to your driving record, and an “increase of premium as a result of the accident is dependent upon your insurer’s merit rating plan.” See more information at Mass.gov.
You’ll want to check with your insurance carrier and your state, but if your state has a low threshold for what’s considered major or minor, that may influence whether you want to file a claim or pay out-of-pocket.
* To put this in perspective, a 2007 study shows that some vehicles sustain more than $4,500 in bumper damage in 6 mph crash tests.
Your Driving History
If you’re a good driver who doesn’t have a history of at-fault accidents or traffic violations, your insurer may not increase your car insurance rates. After all, accidents and violation represents risk, and if your history is representative of a low-risk driver, your insurer will most likely want to keep you as a customer. If you have a clean record, and you’ve been a loyal customer, this is certainly grounds for discussion with your carrier, whether you’re going to renew your policy or consider taking your business elsewhere. If your premium is increased, it doesn’t hurt to compare car insurance quotes to see if there's a better deal.
In addition to your driving history, your company may offer accident forgiveness insurance. The rules and costs of these plans differ by carrier, so it’s a good idea to research and speak with agents to determine if adding an accident forgiveness plan is right for you.
There are many factors that determine whether your insurance rates will increase after an accident. Whether you decide to file a claim or not, we recommend notifying your insurance company of any incident. It’s beneficial to have an incident on record for a myriad of reasons. Consider that many accidents can evolve into legal matters. Accidents can often be a “he-said he-said” situation, and plenty of people are unwilling to accept fault. If there’s another party involved, it helps to have your account of the incident documented and it allows your insurer to better research the matter. You don’t have to file a claim for damages to your vehicle if you don’t want to, but at the very least, the initial documentation can be beneficial. Remember, you are a customer and the insurance carrier has the resources and ability to defend your position should an incident escalate.
When you consider the severity of the accident, who’s at-fault, and your driving history, you’ll be better informed on how to move forward. But don’t forget, your insurance company also has the resources to assist you. They can walk you through a claims process and help you decide if filing a claim is the right decision, and if it will impact your driving record and insurance rates.