Getting Rolled

Car Insurance Increases After One Accident Can Be Shocking.

A perfect driving record for 15 years then suddenly you cause an accident. You must now make a claim on your car insurance for the damages you’ve caused. Come renewal time, you know your rates will go up. The question is, by how much?

It all depends.

The standard increase put forward by the Insurance Services Office (ISO) for a policyholder’s first at-fault accident is 20% to 40% of the insurer’s base rate: 20% for a multi-car policy and 40% for a single-car policy. A base rate is not the policyholder’s existing rate, rather it is the average amount of claims paid plus the insurance company’s claims-processing fee. If you have a good driving record prior to this accident, chances are very good that the base rate will be higher than your pre-accident premium rate.

Say, for example, you insure two cars at a premium of $300 each and a base rate of $400. After this first accident, you may get an increase of $80 (20% of the $400 base rate) on both vehicles. That $160 total would be an increase of roughly 27 percent on your car insurance. But things are rarely that cut and dried.

ISO standards hold that for property-damage-only accidents where the damage is less than $1,000, there is no increase. It also holds that there should be no increase if the accident is caused by someone who has been driving less than 2 years. This is because that new driver is already penalized with a higher premium for being inexperienced. In addition, individual states weigh in with their own surcharge exemptions and limitations.

From there it gets downright complicated. Some insurance companies will base the increase on your pre-accident premium rate rather than the base rate. Others consider the claims statistics of drivers similar to you in terms of age, zip code and driving record before determining the percentage of increase to charge you.

And because none of us ever drives in a bubble, there could be other factors at play. Say you had submitted the accident claim and had a birthday before the next renewal period. If that birthday bumps you up into a higher risk category just as the claim is going through, you might see your premium jump dramatically. Or say you made the claim and bought a more expensive vehicle before renewal time, you might see your premium increase as much as 100%.

But if you sold the sports car and bought a sedan between the accident claim and the next renewal period, your savings on the vehicle switch might help offset the increase brought on by the accident. In addition, some insurance companies “forgive” customers with good driving records the first time they cause an accident. “Forgiveness” is not universally practiced in the industry, and car insurance companies that do forgive good drivers often require those drivers to meet specific criteria before they qualify.

As you’re shopping for car insurance, you might want to find which car insurance companies offer first-time accident forgiveness. While we hope you never need accident forgiveness, simply asking about it could save you an additional 20 percent on your car insurance over time.

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