Do car insurance rates increase after a car accident?

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Melanie Musson
Recognized Insurance Expert

UPDATED: Mar 13, 2020

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Car insurance companies constantly review your driving habits in order to determine how much to charge you for your insurance premiums. Insurance companies profit by obtaining more money in premiums than they spend in settling claims; because of this, high-risk drivers or those who have been in an accident will pay higher rates in order to compensate for their cost to the company.

Many people know that a car accident can cause a rate increase. They may not understand exactly how it works, however, or how to reduce their rates after an accident. By taking the time to understand your insurance policy, you can save money and avoid unpleasant surprises.

Why do my car insurance rates increase after an accident?

Whenever you are involved in an auto accident, your car insurance company must pay to settle the claim. Depending on the coverage you carry, the extent of the damage and who is at fault for the accident your insurance company may have to pay for all vehicles involved in the accident.

If you are not at fault, your insurer can probably recover some of the money it spent on the claim; this is why not-at-fault collisions will not affect your policy as much as those which you are responsible for. If you are not at fault for an accident, your insurance may not raise at all, or your policy may only increase a small amount.

If, however, you are at fault for an accident, your insurance premiums are likely to increase. Whenever you cause an accident, your insurance company is responsible to pay for injuries and damages sustained by everyone involved. This can equal a substantial sum of money, and the company must increase your rates to compensate.

At-fault collisions also cause your rates to increase due to the likelihood of another accident occurring in the future. If you cause an accident, you may have been engaging in dangerous behaviors such as following too closely or failing to stop at a traffic light; these behaviors can lead to more accidents occurring in the future.

How much will my car insurance rates increase?

Determining how much your rates will increase as a result of a claim is a complex process, and no one can tell you for sure until the claim has been settled. Several things are involved in computing an insurance rate. The final amount of the claim plays a large role; minor claims costing under $500 or $1,000 may not have any effect on your rates, or the effect may be very minor. Large claims will have a greater effect on your policy.

Your rate increase may also be dependent on legal factors. If the accident was caused by drunk driving, distracted driving or another dangerous activity, the rates may be more affected than if the accident was caused by weather or a truly accidental cause. Any citations you receive might also affect your rates.

If you previously had a safe driving discount that is lost due to the claim, your rates will be affected more dramatically than someone who did not have a safe driving award. This is why the first accident on a policy often causes the rates to increase more dramatically than any subsequent accident.

Because your insurance premium is calculated by a computer and based upon a complex algorithm, your insurance company cannot tell you in advance exactly what will happen to your rates. Your agent may be able to give you a rough idea of what will happen to your insurance, but the final figure will only be determined once your policy comes up for renewal.

How do I get my car insurance rates back to normal?

Every time you are involved in an accident, receive a DUI conviction or are given a traffic violation, you will receive a point against your driving record. Whenever enough points accrue, you will be considered a high-risk driver; you may have your policy canceled at this point.

In most cases, points can take up to seven years to drop off of your driving record. You may be able to counteract them prior to this time by agreeing to take a driver’s education course or enroll in some other safety program offered by your insurance company.

Otherwise, the only way to repair the damage to your policy is to focus on driving safely and avoiding future accidents or citations. After several years of safe driving, your rates will begin to decrease once more.

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