There’s a reason car insurance companies offer discounts and deals for good drivers. After all, the more accidents one of their customers gets into, the more money they have to pay out in claims. And that includes some of the burden being passed along to consumers in the form of increased premiums.
But not all car crashes are created equal, nor is the impact it will have on your monthly insurance premiums. Long gone are the days when auto insurance companies subscribed to a standard when it comes to raising premiums due to an accident. In some cases, they can increase your rates several hundred dollars a year and in other instances, it will do nothing.
When it comes to calculating the impact an accident will have on insurance premiums, past history, extent of the crash and a whole host of other things are taken into account. With that in mind, here’s a look at what insurers consider when gauging how much the car wreck will cost you.
Four Reasons Why Your Car Insurance Will Go up When You Get into an Accident
Past History Used as an Indicator of Your Future
Nobody wants their past mistakes to stay with them in the years to come, but when it comes to car insurance and accidents, the past matters a lot. That’s because car insurance companies will consider the time between accidents when determining if it should raise your car insurance rates. If you file a claim for a car wreck less than a year after you filed a separate car accident claim, it will give the insurer pause.
In general, most insurance companies look at a driver’s past history for three years after the policy kicked in. If your last accident was before that, you should be in the clear when it comes to rate increases. But if you have had multiple accidents in that three-year timeframe, you may see your rates climb higher. It does vary from one insurer to another but many insurance firms offer drivers discounts for staying accident-free for multiple years. Good driver programs will also allow one accident in many cases without penalizing the insured.
The number of traffic violations you have on your driver’s license can also impact your rates, particularly if you get tickets for moving violations that come with points. The points go on your driving record, stay for a number of years depending on which state you reside in, and play a role in how much your car insurance costs each year. The more points you have, the greater chance you can temporarily lose your license, increasing the risk for the insurer. If you land in the high-risk driver category with your insurance company, you’ll get hit with higher rates because they assume that you will file a claim more so than someone with a better driving record. According to the Department of Motor Vehicles, even if you live in a state that doesn’t use a point system for violations, tickets for speeding, reckless driving, and drunk driving will increase your premiums.
Big Damage means Big Rate Increases
As I mentioned earlier, car accidents don’t come equal. In some cases, a wreck means scratched paint or a dented bumper while in other instances the entire car is ruined. For the at-fault driver, the extent of the damage can play a role in whether or not your insurance premiums go up. In general, the greater the damage the more of a rate hike you will likely see, simply because the insurance company is required to dole out money to make the repairs and compensate the other driver.
But even if you were not at fault, you could see your premiums go up because, based on statistics, if you get in one wreck, it increases the odds of you getting into another. Whether or not an insurance company penalizes the driver who wasn’t at fault is going to vary, but is something to inquire about when purchasing new car insurance. If you live in a no-fault state, both insurance companies share in the costs of the damage and both drivers are likely to see their rates go up.
Younger Drivers Are Already at a Heightened Risk
Young drivers are already paying higher premiums than a person who has been behind the wheel for a decade or more. Add an accident to the mix and auto insurance will quickly get expensive. After all, according to the Department of Motor Vehicles teenagers and new drivers are statistically found to be less safe on the roads than drivers who have years of experience under their belts. Meanwhile, based on a study by The Insurance Institute for Highway Safety, teenagers have been found to drive fewer miles than their older counterparts, but they tend to have higher crash and death rates nonetheless, with the deaths per mile among 16 to 19-year-olds three times higher than drivers over the age of twenty. Teens may drink and drive less than their older brethren but when they do they tend to get into more accidents.
The Insurance Institute for Highway Safety also found that new drivers have a tendency to speed more, are less likely to ascertain a serious situation while driving, and will engage in reckless behaviors such as tailgating more than experienced drivers. As a result, when they do get into an accident, their rates usually march higher. Get into multiple accidents and the auto insurance company could easily drop the driver altogether.
Where You Live Makes a Big Difference
Rewind a few years and insurers all increased premiums by about 20% to 40% following an accident. But these days, it’s not a stretch to see rates that jump more than 40% all because you were to blame for a car crash. Where you live will influence how much of a rate hike you are subjected to. That’s because the surcharges placed on drivers differ by state and insurance company.
Some insurances slap you with increased premiums because of moving violations while others will only increase the rates if you did something that will cost the insurer money. The threshold in terms of what is considered a chargeable accident varies as well. According to a recent survey, drivers living in California, Delaware, and Massachusetts will see the largest increases in rates because of accidents, with premiums going up 92%, 78%, and 72% respectively. Please note, however, that those are extremes. On average, insurance companies in states around the country increase premiums 20% to 30% in the aftermath of a car wreck.
Car accidents happen, it’s the reason they are called “accidents,” but the severity and the driver’s record can play a big role in how much the crash will cost them.
Driving history, the age of the driver, the extent of the damage, and the cause of the crash are also determining factors in whether premiums go up or stay the same. While some of it is out of your control, driving safely and follow traffic rules can go a long way in keeping your auto insurance costs low.
Article written by
A data analyst, Jon is a specialist in all things insurance. Born and raised in Massachusetts, he spends his days poring over numbers while his elderly poodle Snowflake (his daughter named it) keeps him company.