Does The Car Insurance Rate Increase After An 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.