You’ve just been in a car accident. While the injuries were minor and your car survived the ordeal requiring only a small amount of work, you are still quite shaken. Being in an automobile accident may leave you traumatized, but that feeling will slowly wear off with time. Unfortunately, opening your next car insurance bill can lead to a whole new kind of trauma.
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What Happens With Insurance After an Accident?
Once you’ve reported an accident to your insurance company, your rates may increase. This will depend on a variety of factors including the severity of the accident and the damage incurred, who was at fault for the accident, and if you have a safe driving history or a record littered with accidents and tickets.
If the accident was not your fault, there is a good chance that your insurance company will not raise your rates. However, if you have had several accidents (even no-fault) your may see a bump in your bill.
How Much Do Car Insurance Rates Go Up After an Accident?
If your insurance company decides to raise your rates, you can be looking at anywhere from a 3% to a 50% increase over what you were paying pre-accident. Of course, this is a huge range, and there is no way to arrive at a true figure without knowing the specific details of your accident and having access to your driving record. Your agent or a customer service rep at the insurance company is the only one who can give you an exact figure.
The reason why this is a huge range is because there are many factors. At the bottom of the range, the accident was of low severity, your driving record has a low occurrence of accidents, and it may be a no-fault accident. This increases as the frequency of accidents increases and the company lays out more for damages and medical costs.
How Long After a Car Accident Does It Affect Your Insurance?
Much like bankruptcy, an automobile accident can haunt your financial affairs for years to come. While this depends on the state you live in, you may see higher car insurance rates for 3 years after an accident. Throughout the 3 year window (assuming you’ve had no other accidents), you should see the rates returning to your pre-accident costs. However, car insurance rates in general tend to rise each year, so you may not see as profound a difference as you’d hoped for.
How to Reduce Your Car Insurance Rates After an Accident
While a car insurance rate increase may be inevitable, there are a variety of actions that you can take to keep them as low as possible.
Does Your Insurance Have Accident Forgiveness?
Accidents happen… that’s why they’re called accidents. Many insurance companies realize that driving can be dangerous and even the best driver is likely to have an accident every once in awhile (every 17.9 years according to statistics provided by the insurance industry). Because of this, some companies offer Accident Forgiveness where they will overlook your first accident and leave your premium where it is. Every company is different, so ask your insurance carrier if they have this clause and, if so, how it works. Some companies provide this clause immediately while others require that you are a customer for a specific period of time before it kicks in.
Consider Increasing Your Deductible
Your car insurance deductible works the same way as your health insurance deductible. It is the money you will have to pay out of pocket once you file a claim before your insurance will kick in and cover any costs. The higher the deductible you choose, the lower your premium will be. Raising your deductible may save you between 15% and 40% on your car insurance. However, you need to keep in mind that in the case of another accident, you’ll have to spend a great deal more to fix your car.
Drop Unnecessary Coverage If Your Car Is Older
If you are driving a brand-new BMW which has never seen a scratch in its life, you’ll want to have to maximum coverage (which may even be required if the vehicle is being financed). If you are driving a 1999 Corolla that’s being held together by duct tape and a prayer, it’s probably safe to drop the Comprehensive coverage (which covers non-accident related damages like fire and floods) and the Collision coverage (which covers damages caused by impact with other cars or objects). If the annual cost for these coverages is more than 10% of your car’s worth, it’s probably safe to drop them.
See If Your Insurance Has Other Discounts
Insurance companies offer discounts for the strangest things. Ask your carrier if they have discounts for multiple drivers, good students, higher levels of education, packages if you bundle with home insurance, or any other type of discount that may apply to you. If you drive less than 10,000 miles a year, make sure your agent is aware of that fact as it may lead to a lower premium. Your insurance agent should be knowledgeable in all of the potential discounts so you can save as much money as possible.
Take a Driving Class
It pays to be proactive in your search for a rate discount. Many insurance companies will lower your rates if you attend a safe driving class. It’s a good opportunity to sharpen your skills and remind yourself exactly what the laws are. Driver’s Ed was a long time ago, and this will give you the edge you need to get back on the road.
Report Every Accident
It may seem counter-intuitive to notify your insurance company of a minor accident when you know it may raise your rates, but consider the alternative. If the other party decides to notify their insurance company and potentially sue you (and your carrier) for damages, and you haven’t reported the accident, your carrier is within their rights not to honor your policy. The financial burden would land entirely on you, and you’d likely have difficulty finding an insurance company that will provide coverage for you in the future.
Not all car insurance companies are the same, and some of them will hold an accident against you more than others. Request a quote from a few different insurance companies, being upfront about your accident, and you may just find a less expensive carrier.
A car accident is never a good thing. Between the physical and emotional challenges it creates and the property damage, it can be an extremely difficult experience. However, with the right knowledge of car insurance carriers and policies, you should be able to keep your rates low enough that you can get back on the road. Drive safely!