How Do Car Insurance Claims Affect Your Rates

You have car insurance in case something happens to you, your vehicle or your passengers on the road. While no one wants to have to file a claim, accidents can occur for a number of reasons, and safe drivers aren't exempt from mishaps.

Many motorists fear insurance rate increases following a collision, but the impact depends on the circumstances of the accident and other factors relating to driving habits and insurance company policies.

Do Rates Always Increase?

The first thing most people want to know when filing a car insurance claim is how much their premiums are going to go up. However, a rate spike isn't always a give. Making a claim might increase the amount of risk you pose to the insurance company, but several factors influence how risk is perceived, such as:

  • The amount of damage.
    • Fender benders require fewer repairs than serious accidents. Since compensation from the insurance company is lower, you may see little or no increase in your car insurance rates.
  • Fault. In most cases.
    • if the accident doesn't result from something you did, you won't be penalized with higher premiums. Exceptions include living in a "no-fault" state where both insurance companies cover some of the claim costs.
  • Driving history.
    • If you're usually a safe driver, your auto insurance company may offer "accident forgiveness" and waive rate increases after your first accident.
  • State laws.
    • Some states limit surcharges or prevent insurance providers from increasing premiums for drivers who aren't at fault in a collision or who file claims under comprehensive coverage.

Know Your Car Insurance

It's best to learn how your insurance company handles rate increases relating to car insurance claims before you find yourself in the aftermath of an incident. Knowing what to expect can give you peace of mind in an otherwise upsetting and chaotic situation.

Talk to your agent or car insurance representative about the specifics of your policy or ask for detailed information if you're signing up for a new policy. Some companies are more lenient than others when it comes to rate increases. Even if you're a safe driver, you're better off being insured by a company with both reasonable rates and a judicious approach to claims.

For drivers without any accidents on their record, accident forgiveness is an important characteristic to look for in an auto insurance policy. Making safety a priority means you're less of a risk to your insurer, and some companies are more willing to not penalize cautious drivers for their first incidents.

Insurance providers may have a threshold for premium increases or surcharges. This could mean your rates won't go up if the damages are less than a certain dollar amount. However, some companies will increase rates regardless of driver history even if as little as a single dollar's worth of damage is caused. Getting into a collision with an uninsured driver may also increase your rates.

Like traffic violations, accidents remain on your driving record for a certain period of time before they no longer have an effect on insurance premiums. Three to five years is the standard for most companies, meaning additional incidents within this period could trigger additional increases in premiums.

Understand Claim Types

The way you file a car insurance claim after an accident can also dictate how it influences your payment amount. Some small claims may be covered by comprehensive policies, although this type of insurance is more often used in situations where your vehicle is damaged by something beyond your control, such as severe weather or a natural disaster.

Collision coverage is the standard for damage and personal injury caused by accidents. You're more likely to see rates increase after filing a collision claim unless your insurer offers accident forgiveness or other exceptions. When you're at fault for an accident, however, there's little chance you'll be able to avoid a rate hike. Causing a severe accident could lead to you getting dropped when it comes time to renew your policy and make it difficult to obtain favorable rates with other companies.

While one claim for a collision you didn't cause may not have much of an effect on your insurance premiums, too many claims in a short period of time could result in exponential increases. Insurance companies bump rates up by larger and larger percentages for subsequent incidents to offset the expense of insuring high-risk drivers.

Lowering Rates After Making a Claim

To reduce increased rates that you've incurred as the result of an auto insurance claim, you can:

  • Take defensive driving courses and submit proof of completion to your insurance company.
  • Speak with your agent about other potential discounts.
  • Drop unnecessary or excess coverage.
  • Practice safe driving to lower your risk to the company.
  • Compare rates on the same level of coverage from other insurance providers.

Even in cases where your insurance rates don't go up, taking these steps can lead to significant savings. Completing defensive driving courses ensures you stay on top of the latest traffic laws and gives you a chance to brush up on details you may have forgotten since you first learned to drive.