Getting into a car accident is a scary and stressful experience. There’s a lot to deal with after the fact, including other drivers, determining fault, police reports, and filing claims. But what happens to your auto insurance rates after you file a claim?
Depending on your claim history in the last three to five years, filing a new one may have an impact on your premium. But if it’s the first after many years of being claim-free, you’re probably safe. In this article, we’ll help you know if you’re at risk for a rate increase if you file an auto insurance claim. This includes a breakdown of when you are or aren’t likely to see a price hike.
Why Rates Increase After a Claim
Insurers make money on the basis that you may need to file a claim. With that in mind, you might be wondering why they would raise your rates if or when that time comes. The answer is all about cost.
When you file an auto claim, your insurer takes on the bulk of the financial responsibility for any damages to your car. This affects the company’s bottom line. To compensate for this, your carrier may raise your rates to keep up with what you’re costing them.
As you’ll find out later in this article, filing one claim (especially a small one) isn’t likely to cause a price hike. However, a pattern or just one at-fault accident could cause your premium to go sky-high. Ultimately, what happens depends on the circumstances.
Severe Claims Hurt More
Not every claim has the same effect on your rates. Some are more severe than others. For instance, a minor fender bender comes at a far lower price than an at-fault accident with multiple injuries and thousands in property damage.
So, which types of claims are more likely to raise your auto insurance premium? Here’s a look at which put you at risk to pay more:
At-Fault Accidents
If you cause an accident, your rates are sure to skyrocket. It’s also likely to cause your insurer to label you as a high-risk driver. When you’re in this category, your provider will charge you far more than a normal driver. And, in some cases, you may end up losing your policy altogether.
Totaled Cars
Any accident that results in a totaled car (or more if you’re at fault) is likely to cause your rates to go up. These types of claims are wildly expensive. Insurers must pay you an amount equal to the car’s actual cash value (ACV), which can reach the tens of thousands.
No-Fault Accidents
A no-fault claim, especially one with injuries, may raise your premium. This may not seem right, but it’s all about how much it costs your insurer. Injuries are often expensive, and costs can last for a long time.
Comprehensive Claims
Even though they’re out of your control, comprehensive claims could increase your monthly costs. There are two reasons for this. First, insurers will consider the cost of the claim. Next, your risk for future losses is key. If you live in an area that’s always having natural disasters or crime, your rates may go up.
Claim Frequency Is a Big Factor
The cost of your claim isn’t the only factor in whether your rates will go up. Your insurer may also raise your prices if you have a pattern of losses on your record. Two or more claims in a span of three to five years will likely increase your rates.
If you file enough claims, your insurer may even place you in the high-risk category. In this case, you could lose your policy or have a very expensive premium.
When Do Claims Leave Your Record?
After a certain amount of time, insurers will no longer hold a claim (as well as tickets and accidents) against you. This largely depends on your state and insurance company. However, in general, a claim stays on your record for three to five years.
Should You Ever Not File?
In rare cases, it might make sense to avoid filing a claim. If you got into a single-car accident with minimal damage, you could just pay for the repairs yourself. Similarly, if you have little damage from an “act of God,” such as hail hitting your windshield, you may want to pay for it on your own if the repair costs are less than your deductible.
However, it’s always a good idea to let your insurer know about an accident if it involves other people. This will protect you from:
- New damages showing up later
- Lawsuits
- Injuries that aren’t evident right away
- Fraud or false claims
Accident Forgiveness Is a Good Idea
An at-fault accident can be devastating for your insurance and driving record. But, if you have accident forgiveness on your policy, you can avoid a rate increase.
Most insurers offer accident forgiveness as an optional coverage. Others may simply reward it to you automatically. But first, you’ll need to be eligible. Requirements vary by provider, but you generally need about three to five years without tickets or accidents.
How to Lower Your Rates After a Claim
If a recent accident causes a price increase, it’s not always the end of the world. There are plenty of ways you can lower your costs, including:
- Taking advantage of discounts. The easiest way to save on your premium is by qualifying for rate reductions, such as bundling or other auto discounts. There may even be some that you don’t know you’re eligible for. Be sure to speak to your agent to look for extra savings opportunities.
- Raising your deductible. By increasing your deductible, you’ll pay less each month for coverage. This is because you’re taking on more financial risk. Only do this if you can afford to pay the amount if you file a claim.
- Shopping around. Another insurer may be willing to give you a better deal. It’s a good idea to gather quotes and compare them. This way, you can find the best deal.
- Lowering your coverage limits. Sometimes, you’re paying for more than you need to. You can always lower your limits (as long as you meet the minimum amount in your state) so that you don’t pay as much. This is only a good idea if you’re comfortable with having less coverage. You should speak with an agent before doing so.
- Drive a safe car. By picking a car with excellent safety ratings, you’ll pay less for coverage.
- Maintain good credit. In some states, your credit score factors into your rates. Your provider will likely charge you less if you can keep your credit history in good shape.
- Avoid accidents. This is an obvious one, but if you can put together a few years of safe driving, your prices will dip.
Frequently Asked Questions
Will my rates go up after a fender bender?
If you got into a minor accident, your rates may rise. This is especially true if you’re at fault. However, because costs are low, your rates may not go up dramatically.
Be aware that if you get into an accident with another car, you should always report it to your insurer. If you don’t, you could face financial ruin if the person sues you. You may also be on the hook for future expenses that the person “just discovered.” It’s always best to protect yourself by getting your insurance company on your side.
Will my rates go up if the accident wasn’t my fault?
Your rates can go up after a not-at-fault accident. However, it depends on your claim history. If you have a track record of incidents, you can expect your rates to soar. But if this is a rare occurrence, you’re likely fine.
How much do rates go up after a claim?
After a claim, your auto rates could go up anywhere from 20 to 50%. Besides a general rate increase, you will also lose any discounts related to safe driving, which can be significant. The exact amount of the increase depends on the severity of your claim, your record, and many other rate factors.
How far back do insurers look at your claim history?
Providers generally consider the past three to five years of your record. Once that period is up, insurers should no longer use accidents against you. In the meantime, you can lower your rates by focusing on other things, like getting discounts or raising your deductible. After years of safe driving, you’ll also be eligible for safe driving discounts again.
Should you pay out of pocket instead of filing a claim?
It may be a good idea to pay out of pocket instead of filing a claim to keep your insurance record clean. This is especially true if damages are minor and are lower than your deductible. However, if the accident involves another driver or costs significantly exceed your deductible, it’s always a good idea to file a claim.
