Planning to file a claim with your auto insurance provider? Here’s what you should know before making the decision to file, because your premium rates may increase substantially.
This warning comes courtesy of a joint study between InsuranceQuotes and Quadrant Information Services. According to the data, drivers who make a single auto insurance claim saw their premiums increase on average by 44.1%. The study looked at the impact of claims worth $2,000 or more and compared premium increases in all 50 states and Washington, D.C.
Keep in mind, the reported premium increases weren’t for individuals who have a history of unsafe driving. The study concluded that, even after a single auto claim, premium increases can be significant. Even worse, premium increases following claims have risen incrementally over the last few years.
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How Insurance Rate Increases Vary by Company
You can expect to see up to a 44.1% increase on your premium after an at-fault accident. This increase, however, depends on various factors, including your car insurance company.
Here are some typical post-accident insurance rates with popular U.S. car insurance companies from The Zebra:
|Company||Average Premium After At-Fault Accident|
How Insurance Rate Increases Vary by State
While the numbers show your rates could surge after an accident regardless of where you live, some states report costlier increases than others. As the InsuranceQuotes study noted, the following five states reported the largest premium increases after a single auto claim worth $2,000 or more:
- California – 63.1% increase
- New Hampshire – 60.3% increase
- Texas – 59.9% increase
- Massachusetts – 57.3% increase
- North Carolina – 57.3% increase
States with the lowest premium increases after a similar claim included:
- Maryland – 21.5% increase
- Michigan – 26.1% increase
- Oklahoma – 27.9% increase
- Montana – 30.2% increase
- Kentucky – 30.6% increase
Experts who commented on the study blame the wide swings in premium increases on the fact that insurance regulations largely vary by state. In California, for example, voters passed a proposition in 1988 which limited the factors insurance companies could use to set auto rates. Because California insurance premiums from that point forward could only be based on driving record, average miles driven, and years of experience, it’s only natural for at-fault claims to cause premiums to burst.
In Maryland, on the other hand, insurance companies can base premiums on myriad factors including gender, age, occupation, credit score, and marital status. The state’s broader base of rules for insurance companies may punish unmarried young men with bad credit whether they’re good drivers or not, but it’s very likely the reason Maryland reported the lowest after-accident premium surges of any state.
How Long Will My Rate Be Higher?
Increases in your insurance premium can last as long as three to five years after an at-fault accident if damages to your vehicle exceed over $2,000. Rates vary, with some insurers charging much more than others. Here are a few popular car insurance companies to see how much your insurance could be affected in just one year following an accident.
|Company||Year 1 Increase||Year 1 Average Premium After At-Fault Accident|
Which Claims Increase Your Rates the Most?
Not surprisingly, the InsuranceQuotes study concludes that bodily injury claims can cause your premiums to spike the most.
“Bodily injury claims are filed whenever a driver causes injuries to individuals as the result of an accident,” notes the press release. “And because they are often so costly, every state except New Hampshire requires drivers to obtain a minimum amount of coverage for these circumstances.”
As the numbers show, a single bodily injury claim will result in an average premium increase of 48.6%. However, some states reported larger premium hikes after bodily injury claims, including: California (73.2%), New Hampshire (65.9%), North Carolina (65.9%), Texas (64.8%), and Massachusetts (62.3%).
On the flip side, comprehensive auto claims resulted in the least significant premium increases overall. Unlike bodily injury claims which can result in significant medical bills, comprehensive claims include instances like getting bad gas in your car, hitting a deer, or having a tree fall on your car.
In each of these cases, the costs are usually insignificant. Still, the average premium increase after a comprehensive claim was 2% nationally across the board. Only Nebraska (10.6%), Louisiana (9.7%), Minnesota (7.1%), Wisconsin (6.9%), and Iowa (6.8%) reported increases much higher than average.
Are Post-Accident Premium Increases Legal?
At this point, you might be wondering, “Is this even legal?” At the very least, you’re likely pondering whether it’s ethical for insurance companies to raise rates after claims.
After all, we buy car insurance policies to protect ourselves in the event of an accident. So, isn’t using our insurance when the time comes the whole point?
The first detail to note here is that, yes, insurance companies are well within their rights to bump up your rates after an accident. “While it might seem unfair to get an auto or home insurance rate increase for simply using your insurance, it is legal in just about every state,” says Laura Adams, senior insurance analyst at InsuranceQuotes.
Insurers charge based on your risk profile — how likely they believe you are to make a future claim. The less risky you appear, the lower your rate.
“After you make a claim, statistics show you’re more likely to make additional claims and therefore become a riskier customer,” says Adams. “To compensate for potential future losses and ensure profitability, insurers charge more.”
Should You Bother Filing a Claim?
If the thought of your insurance rates surging keeps you up at night, it’s important to keep a few things in mind. First, your auto rates are only expected to surge if you are at fault in an accident. If you are at fault, or if multiple parties are involved, it’s in your best interest to play it safe and contact your insurance company. However, if someone else is at fault, the full claim is almost always handled through their insurance company – not yours.
Obviously, that means the easiest way to avoid a huge bump in your premiums is to drive safely and avoid accidents when you can. In fact, most car insurers offer special discounts for safe drivers. Talk to your provider to discuss if you qualify for a safe driver discount.
Of course, life happens, which is why we have insurance in the first place. It’s not always feasible or possible to avoid accidents or claims of any kind. But in the face of surging premium costs, it’s smart to weigh your options before you file a claim on your insurance, says Adams. Sometimes, it’s beneficial to pay for repairs yourself if damage is minimal. This way, your premium won’t increase.
“If you have a minor repair with a cost that’s close to your deductible, it may not make sense to file a claim and see your rate go up,” says Adams. “For instance, if a tree falls on your property’s fence, or you have a single-car accident that damages your vehicle or your property only.” It might make more sense to pay for the damage yourself upfront, rather than file an insurance claim and pay significantly higher premiums for the next few years.
That said, Adams also reminds us that the main point of insurance is to protect us from accidents that could present a financial hardship.
“It’s important to use it when you need it, even if your rate will go up,” says Adams. “Just don’t be short-sighted by filing frivolous, small claims that could cost more in higher premiums in the long run.”
What Should You Do if Your Insurance Rates Climb?
Whether you file a claim with your car insurance or homeowner’s policy, you do have some options if your premiums surge. And the No. 1 option you have shouldn’t come as a surprise: If you’re unhappy with your insurance company for any reason, you should consider shopping around with other best car insurance companies.
As Adams pointed out, shopping for new insurance won’t hurt your credit because insurance companies only make “soft inquiries” to your credit report. There’s no downside to shopping around, notes Adams, adding that it’s “just an opportunity to save more of your hard-earned money.”
Lastly, you can also consider an insurance company that offers some sort of “accident forgiveness program.” Allstate is one insurer that comes to mind. According to the company, “your rates won’t go up just because of an accident, and you’re protected even if it was your fault. And the best part is, Allstate Accident Forgiveness starts the day you sign up.”
These programs are good ones, says Adams, if they are free. Some insurance companies, like Nationwide and Allstate, offer accident forgiveness at an added cost. But if you’re paying higher premiums to ensure your first accident is forgiven, you may not save any money when it all shakes out.
“Shop around to make sure you’re not overpaying for this benefit,” she says.
Other insurance companies structure their accident forgiveness programs similar to a loyalty program, like Progressive. While you don’t pay extra for it, you must be both insured with the company and accident-free for a certain period of time before qualifying. This program is tiered based on how long you’ve been accident free and how major an accident Progressive is willing to forgive.