Why do auto insurance rates rise after an accident?

Not only is getting into a car insurance wreck hard on your body and soul, it’s also hard on your wallet. Typically, rates will rise after an accident, and sometimes, even when you were not the at-fault driver.

Earlier this year, a study looked at how insurance rates rise after a car accident. Researchers found that a whopping 41% was the average cost increase for drivers to get insured after an accident.

The study looked at a fictionalized 45-year old female, married and employed, who had an excellent credit score. Their hypothetical driver had never had a lapse in coverage nor any previous insurance claims.

Researchers invented an accident scenario with that driver to see how rates would change. They filed three different claims: bodily injury, property damage and a comprehensive claim. The third type of claim is the one that covers a car if it’s damaged by weather-related events, theft, or flooding, but has nothing to do with collision or other driver.

Here is what the researchers found:

Drivers who make a single claim of $2,000 or more can expect their premiums to increase by 41 percent. That translates to a $335 increase for the average U.S. auto insurance premium of $815 a year. For the unfortunate souls who make two claims in one year, the increase jumps to 93 percent.

Considering that the rates tend to stay high for about three years after each claim is filed, those rate hikes pretty much pay for the damages you’ve been paying your insurance premiums to cover. It’s almost like the car insurance company is giving you a loan to cover your accident losses that you pay them back for over the years.

Further, from DMV.org, here is something to keep in mind for times when you must file an uninsured or underinsured motorist coverage claim. It typically means that you’ll get a rate increase – even though you did not cause the loss.

Insurance companies are risk averse and in the business of making money (and paying giant advertising costs.) Consider that Farmers paid $700 million over 30 years to put its name on a planned NFL stadium in Los Angeles. Despite the fact that the city doesn’t even have a team yet! And Aaron Rodgers, receiving $5.8M in total endorsements, does not come cheap to State Farm. These are old companies in it for the long run. They have shareholders to consider, and pay out major claims if their covered drivers are found to be at-fault.

Where they can recoup costs, they will. Some laws regulate how much this can occur, but the bottom line is the bottom line.

If you've been involved in a motor vehicle accident and you are reeling from the losses and damages you incurred, help is available to you. Hiring a personal injury attorney can be the best way to recover from your losses. Good neighbor or no, your insurance company is there to help even if they need a tough lawyer to remind them of that. 

Bill Coats is a personal injury attorney in Bellingham, Washington, well experienced in negotiating with insurers and getting fast, full and fair settlements quickly. Contact him for a free consultation today. You pay nothing until your claim pays out. 

 

 

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