A car crash may only last a few minutes, but the financial consequences can last for years. Even in a minor accident with no injuries or serious car damage, drivers may see insurance rates go up. In some states, car crashes can affect insurance rates for up to five years. Even good driving with a clean record can lead to an accident; according to an analysis by Forbes consultants, the national average increase in accidents caused by driving with a clean record is 41 percent. While not every crash will result in higher rates, drivers may be able to reduce the financial impact if they are already affected by higher rates.
How does a car accident affect insurance?
If it’s the party responsible for the fault in the car accident, it’s likely to see car insurance rates increase at renewal. This is because an at-fault accident is considered a “chargeable” accident, which typically represents more than 50% of the policyholder’s fault, and the accident caused one of these two outcomes:
• Damage to other people’s property, such as another car or fence
• bodily injury or death of others
The auto liability insurance portion of the policy covers property damage or injury to others. When making a claim against your own liability insurance, this can result in a “surcharge,” which is an increase in the actual rate after a chargeable car accident. The surcharge will start to be charged when the policyholder renews the policy (the insurance company cannot charge the surcharge to the head person during the policy period). The overall severity of the crash and the resulting cost of insurance claims can affect insurance rates; minor parking lot accidents typically don’t have the same impact as major crashes. In some states, insurers won’t increase insurance rates if the claim amount falls below a certain amount. Example: If a policyholder is involved in a car accident in Massachusetts, no surcharge will be charged for claims under $1,000.
Will insurance rates go up if driving is not the party responsible for the accident?
Auto insurance rates typically only go up when driving causes an accident that causes damage or injury to others. Here are some examples of non-toll car crashes:
• The policyholder’s vehicle is hit by a hit-and-run driver
• Damage to the policyholder’s vehicle while it was legally parked
• The back of the policyholder’s vehicle was hit by another vehicle and the policyholder was not convicted of a traffic violation related to the accident
If involved in an accident, the auto insurance company may need some evidence that the insured person was not involved in the accident. Here are the documents that can be prepared:
• Police report on the accident
• A statement by another driver’s insurance company accepting liability for the accident
• Written statement by another driver, under penalty of perjury, proving fault
• A legal document showing that the policyholder is compensated for damage caused by the accident
In addition, accidents covered by comprehensive insurance generally do not result in increased rates; these include collisions with animals and damage caused by falling objects and flying objects such as gravel or road debris. Still, insurers generally believe that drivers with a claim history are more likely to file a claim in the future, and having a comprehensive insurance claim record in the claims history can result in higher auto insurance premiums.
How Long Do Accidents Affect Auto Insurance Rates?
The length of time a breakdown accident affects auto insurance rates depends on the insurer and state but is generally around three to five years. For example states like New York and Texas allow insurers to levy a surcharge only on accidents in the past three years, but states like Massachusetts allow a five-year surcharge. Some states and insurance companies will reduce the cost of surcharges charged on driving policies if no accidents are caused each year (eg, another breakdown accident or a moving traffic violation).
How to reduce car insurance costs after an accident?
Here’s how to reduce your auto insurance bill if you’re hit with a surcharge due to a car accident:
• Ask for a discount after a car accident: Asking your insurance company for a discount can be awkward, but you may still be eligible for discounted car insurance. For example: save on premiums by going paperless, or maybe get a lower rate if you stop driving to and from get off work every day.
• Safe Driving Test: The best way to recover from a breakdown accident is to practice safe driving. If you believe you are a good driver, consider switching to usage-based insurance. These programs track a driver’s driving behavior and generate scores and tips to improve driving behavior. Drivers can earn insurance discounts if they score well.
• Compare prices: If you are not satisfied with your current insurance company’s prices and/or service, you may want to compare auto insurance quotes. One of the best ways to save money on insurance is to shop around. While accident surcharges will follow policyholders to a new auto insurer, other insurers may still be able to offer better rates than existing insurers.