Get, Compare and Save Now!
Find the cheapest auto insurance quote online and get covered for less.

Does The Car Insurance Rate Increase After An Accident

red car in rear end accident

With a few exceptions, yes, it does. How much it will increase is a whole new ball game though and the only safe remark is that it will increase a lot if you have frequent claims.

The definition of “frequent claims” isn’t as easy as it sounds though. It all boils down to the insurer’s so-called surcharge schedule, i.e. the way they decide to treat customers who file claims. These in-house policies vary from one company to another and, even though some jurisdictions specifically ask insurers to hand over the details to you upon signing a new contract, they are hard to read and understand. “They make your head spin”, as the CEO of a popular insurance company said.

Assuming you caused an accident and you have a ten years’ spotless driving record, some companies will raise your fees by as much as 20%, while others will simply “forgive” you. Allstate’s “accident forgiveness program” is a good example of insurers understanding that accidents happen even to the best drivers, so they won’t increase your premiums if it is your first crash.

A lot of car insurance companies use a model based on the Insurance Service Office (ISO) standard when computing the premium increases. The guidelines say that the increase should be of 20% of the company’s base rate (the average premium charged in the state minus the average level of discounts plus the company’s claims processing fees) for a multi-car policy and of 40% of the base rate for a single one. If you have two cars insured at $250 each and the company’s base rate is of $300, you will incur a $60 surcharge on each (20% of $300), which leads to a total increase of $120, or 24%.

As outlined in the beginning, companies are allowed – and actually do – set their own surcharge schedules, and the figures are based on a variety of factors, such as the number of claims in the past 12 months, your age, your driving record, number of cars insured and many more. When buying a new policy it would be advisable to inquire about the insurer’s surcharge schedule.

fast, easy & free no obligation quotes