Most often when it comes to car insurance advertising, companies like to boast of their "Accident Forgiveness" or "Good Driver" discount. That's because accidents have a big influence on your annual car insurance rates. An accident, or its absence, can mean a difference of hundreds of dollars in your rates. Below, we will explore what is considered an accident, and what is not in the eyes of insurance companies, and how accidents can affect how much you pay each year.
How Much Does Your Car Insurance Rate Go Up After an Accident?
Our five-state study found that rates for 30-year-old men who drive a 2014 Toyota Corolla will increase by an average of 1.33x after an accident that causes damage to the body and vehicle. Accidents, which only involve damage to property or vehicles, are less drastic, with an average increase of 1.23x. So, if your annual premium is $ 1,000 before an accident, it can be $ 1,333 after you have an accident with hospital bills and repair costs, and $ 1,230 only for accident damage to the vehicle.
As with most car insurance issues, results can vary from country to country. In our analysis of car insurance rates in Massachusetts, we found rates increased by 1.48x after an accident, while in Pennsylvania rates only increased by 1.16x. Between companies there are also quite big differences. State Farm, for example, averaged only a 1.20x interest rate increase across the states that we studied while GEICO had an average increase of 2.18x. Basically, in the event of an accident, the damage they can do to your tariff is very dependent on the state you are from and the company where you hold the policy. That is why it is always urging consumers to compare offers - the same driver and accident can be treated very differently by various insurance companies.
What is Accident According to Car Insurance Companies?
To answer this question, we examine how the five largest car insurance companies in Alabama calculate their quotes: State Farm, GEICO, Allstate, Progressive, and Farmers. We chose Alabama because it was the only state where complete information for all five companies was available. While certain things can change between countries - such as the severity of an increase in interest rates or determining errors - which is largely an accident must be more or less constant between countries.
According to State Farm the accident is when claims have been made "a total of $ 750 or more under coverage of property damage and collision protection combined." The accident must also be at least 50% driver error. GEICO calls them "accidents that qualify," and similar to State Farm, has a monetary threshold. But in this case, for certain "risk groups", the threshold is $ 500 instead of $ 750. GEICO also maintains 50% of the error limit.
Allstate divides what is considered a billable accident into whether they calculate premiums for new customers or returning customers. New customers get a tighter definition, considering any accident that results in damage to property, bodily injury, or death. Those who want to renew rates have a threshold of $ 500 to be surpassed so that accidents are considered costly, as well as 50% errors. Progressive and Farmers also follow this definition, requiring new business applicants to have 0% accident error so as not to count towards their rates. To renew a Progressive business requires an error of less than 51% while Farmers need a payment of less than $ 400.
What does not count as an accident
Defining what is not an accident is probably more complicated than defining what is. One factor that we find common to most insurance companies, however, is the percentage of fault attributable to a driver in an accident. We mention above that billable accidents are those in which a driver is deemed responsible for more than 50% of the mistakes. Therefore, if your role in an accident is less than 50%, your company will not charge it on your rates (unless you are a new customer for the companies mentioned above). To prove the fault in an accident is however difficult and can leave room for a lot of ambiguity.
Fortunately, State Farm provides more information in Alabama and explicitly explains what it does not consider an accident. According to State Farm, "An accident will not be considered liable or liable for the charge if the plaintiff demonstrates ..."
- It was caused by contact with birds, animals, missiles or falling objects
- They were legally parked
- They have been reimbursed by or on behalf of the person responsible for the accident or have rendered a judgment against that person.
- They were struck in the back by another vehicle and were not convicted of a traffic offense related to the accident.
- They were struck by a driver who jogged if the accident is reported to the relevant authorities within 24 hours.
- They were not convicted of a traffic violation related to the accident, but the driver of the other car involved in the accident was convicted of a traffic violation
Allstate, Progressive and Farmers also fit this definition in their Alabama rulebooks, albeit with some additional provisions. GEICO does not include any of the above exceptions in its rules manual, but shares with Allstate an exception that excludes cases where "a full-time firefighter or a peace officer of a municipality or county has been involved in an accident in the performance of his duties. "Farmers also do not take into account accidents resulting from tire failure.
Time is also an important factor when it comes to qualifying an accident. In general, all companies are attentive to the three years preceding the policy's start date. So, if your accident happened five years ago, it will not usually be used against you when calculating your rates. However, this period may not apply to certain forgiveness programs in the event of an accident.
What other influencing factors influence rates?
If you are involved in an accident causing significant damage and whose responsibility is primarily the cause, there are certain mitigating circumstances. On the one hand, your auto insurance company and your state may have an accident rehabilitation program that will cancel, usually a qualified accident. If you are not lucky enough to have an accident rehabilitation program, there are a host of other factors that may or may not reduce the severity of your accident on your rates.
Age: Surprisingly, the younger you are, the less worries you have about your rate hike. With respect to auto insurance, young drivers are generally disadvantaged because insurance companies perceive them as "risky" drivers and are therefore more likely to charge the insurance company. It is likely that they have already taken into account the higher statistical probability of expensive accidents in this age group in their rates, which translates into a higher initial cost (before the accident). In fact, when an 18-year-old has an accident in Alabama, his rates increase by about 7% less than those of 30 years. We tested this in two other states and found that fares were lower for younger drivers. For more information on the relationship between age and rates, click here.
Number of offenses: The number of accidents in which you are involved and their frequency are a determining factor in determining the level of your rates. By cumulating four eligible accidents in three years, your rates will increase by 2.25 times in Alabama and 2.14 times in Massachusetts. If you have ever had an accident within three years, you should expect a significant increase in rates.