Big Bang: How Does a Car Crash Affect Your Auto Insurance Rates?

A few days ago, we received an indignant mail from Oscar Delaney of Bloomington, Indiana, complaining that his auto insurance company had fixed a higher rate on his policy after a car crash that he had been involved in seven months ago. The gist of his complaint was that “it was not my fault – I had to swerve to avoid hitting a dog”. Moreover, though Oscar was lucky to escape serious injury, he did require significant medical attention that amounted to a fairly steep bill. However, when he applied for a renewal on his car accident insurance policy, he found, as he wrote, that his auto insurance rates had been raised.

What you must be thinking is: is this a fairly typical situation? Well, there's a catch here. In Oscar’s case, we found that he had a fairly extensive history of driving offences, so even though this particular accident was not his fault and he had filed a comprehensive claim, he had to bear the burden of higher rates owing to his record. In addition, he had filed a claim for extensive glass damage, which automatically raised his deductible on comprehensive, which meant he had to pay for some part of the damage out of pocket.

However, and this is the catch, your auto insurance rates will very likely go up at the time of renewal even if you have a fairly clean track record, if you have had a recent accident through a fault on your part. An example of this would be the case of Janine Marshall from Houston, who was clearly violating a traffic rule when she rear-ended the car in front of her as she spoke into her cell phone. Since she filed a claim to both repair the damage to her car as well as pay for her medical expenses, she found herself faced with higher auto insurance rates when renewal time came around.

So an important question obviously is, how long does an accident stay on your record? In a case like Janine’s, the law allows most insurance companies to charge for an accident for three years from the day they begin charging for it, as opposed to the time you were actually in the accident. So if you had the accident in November and your policy is due for renewal in March of the next year, the rates won’t go up until March and will remain in force three years from that March.

The other important question is: by how much will the auto insurance rates increase? Typically, the auto insurance rates increase from 20-40% per six months. In addition, the company may decide to suspend any discounts that you may have been enjoying. Contrary to popular belief, however, the company is not attempting to recover the money they paid out while settling your claim (the amount would very probably be beyond your means!). The increase is intended to cover the risk of your having a similar accident within the next three years and thus charge you a higher premium. In plain terms, you now pose a higher risk to the company and they will make you pay for it.

Moral of the story: don't use your cell phone while driving!

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