Of course, you want to keep your auto insurance premiums as low as possible. But now that you've had an accident, will your rates climb dramatically? Is there anything you can do to avoid or limit an increase in your premiums? The answer depends on the state you live in, your insurance company's pricing practices, and a number of other factors. For example, was the accident your fault? Was another driver or someone else's property involved? Was anyone injured? How many accidents have you had in the past?
If this was your first accident
If it's determined that you were at fault for a collision with another car or another person's property, you can generally expect an increase in your premiums come renewal time, even though it was your first accident. But this is not always the case. Some companies will look past a single accident, especially if no one was injured and there was limited monetary damage. Under a forgiveness policy, your company may hold your rates stable if you have an otherwise clean driving record and have been insured with the company for a specified number of years. If this was your first accident, ask your company if it has such a policy.
If the accident was not your fault
Many states have laws that protect you from rate increases for accidents in which you were not at fault. Unfortunately, even if you were involved in an accident where the other driver was responsible, your premiums may still go up. The reason is that you may be considered more prone to accidents compared with drivers who have had no collisions. This is especially true if you have had more than one collision, even if none of them were your fault.
Generally, if the other driver caused the accident, that person's insurance company will pay all costs, and your company will incur limited expenses on your behalf. But if your company incurs substantial expenses, your premiums could possibly increase, even though you were not at fault. For example, if your car runs into another car after slipping on a patch of ice during a storm, your level of blame would be reduced due to the ice, but your insurance company would have to pay the cost of the repairs, minus your deductible. The insurance adjuster might conclude that you could have avoided the accident,
and you may now be considered a higher risk.
If the accident was your fault
Every insurance company has its own method for determining when and how much to raise your premium following an accident in which you were at fault. Some will tack on an additional 40 percent to your base policy, increasing your payments by at least that much. Others will use a complicated internal points system, grouping you in a pool with other higher-risk drivers. And if you cause additional accidents, you'll be placed in a still higher-risk pool.
Many state insurance departments have also developed their own points formula, standardizing the rate structure for all policyholders within the state. But your insurance company will still ultimately decide how many points to add to your policy if you have an accident. And not all companies and states apply the formula in the same way. Points are gradually removed from your policy over a period of two to six years.
If the accident was minor
Suppose another driver taps you from behind while both of you are leaving a parking lot. After a quick survey, you find there is little damage to either vehicle and no one is injured. Should you and the other driver settle things between the two of you and leave your insurance companies out of it?
If you do decide to handle the matter privately, you'll want to cover all your bases. Have the other driver sign a written agreement that absolves you from further liability. The agreement should also describe the accident and what both of you agree to do. If you fail to get something in writing, a dishonest driver could later claim that the accident was your fault, that you caused bodily injuries, and that you simply drove away from the scene without stopping. This is one reason why insurance companies want you to report all collisions, no matter how minor.
If no other driver was involved
If you damage your car while driving, but without colliding with another car or someone else's property, you may again be tempted not to make a claim on your collision coverage. Generally, your insurance company wants you to report all accidents, no matter what the circumstances. But in this case, you could pay for repairs out of your own pocket and avoid paying higher premiums.