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The Russell Agency, LLC Blog

All You Ever Wanted to Know About Insurance

How Accidents Impact Your Insurance Policy

Accidents, claims, tickets and violations can all cause your insurance rates to rise. Whether an accident causes a rate increase really depends on the nature of the accident, the coverage you have, the insurer and the state you live in.

How premiums are calculated

Insurers evaluate risk based on a number of factors, from where you live and how far you drive to the exact make and model of your car. This evaluation process is called underwriting. It’s what an insurer does when analyzing your insurance request and deciding whether or not you are a good risk.

Underwriters also take into account your age, driving record and claims history. These all influence the premium greatly. People who have a lot of tickets or claims know just how expensive auto insurance can be. Younger, less experienced drivers are perceived as higher risks due to the fact they are more prone to collisions.

Not everyone can be claims-free, though, and not every claim or driving violation is considered. There are important variations in rates from insurer to insurer and from state to state.

What claims matter most

Most insurers will not raise your premiums if you’ve had a minor accident or small claim. Collisions where the other driver is at fault are also rarely factored in since your insurer isn’t the one who settles the claim. Frequent claims, however, can result in a minor rate increase when you have three or more claims within a short period of time.

The claims that cause the greatest increase in your premium are major collisions in which you are at fault. Nationwide data is lacking on the exact size of the rate increase, but it can be major, especially after a second at fault claim.

About rate increases

The only way to circumvent the rate increase of an at-fault collision is if your insurer provides accident forgiveness. This coverage isn’t free and it will only shield you from the rate increase resulting from one at-fault accident. Some insurers also provide a claims-free discount that is lost after an at-fault claim and accounts for part of the rate increase.

The process of rate determination and underwriting follows strict guidelines that change from state to state. Certain states like California restrict the amount of information an insurer can collect to establish their rates while other states allow insurers to factor in more crucial information (such as credit history) to assess a person’s risk. 

Insurers are companies that provide an essential service by balancing risk. They rate risks based on statistical probability of future claims. States that have fewer restrictions on data collection allow the insurers to paint a more accurate picture of an individual, which can result in smaller increases after at-fault accidents for drivers that have an otherwise spotless profile.

Reach out for more information

How long your rate increase will remain can vary from one insurer to the next. Reach out to your insurance professional if you have any questions about your coverage, your driving record or your claims history.