Why Your Auto Insurance Rates Might Increase After An Accident

​Auto insurance is a necessary expense for every driver, but after an accident, many people are surprised to see their rates increase. Even if you are not at fault, your premiums could rise due to a variety of factors. Understanding why this happens can help you manage expectations and make informed decisions about how to navigate the aftermath of an accident. Here’s a breakdown of the reasons why your auto insurance rates might increase after an accident.

1. At-Fault Accidents Raise Your Risk Profile

• Risk Assessment by Insurers:
  Insurance companies set rates based on risk. If you are involved in an accident—especially one where you are at fault—your insurer may classify you as a higher risk, meaning they’ll raise your premiums to reflect that increased likelihood of future claims.
  
  
• Insurance Industry Standards:
  Insurers use past behavior to predict future actions. Even if it was a minor incident, an at-fault accident suggests that you may be more likely to be involved in another accident, which can lead to a rate hike.

2. Increased Claims History

• Claim Frequency:
  Your insurance premiums can rise due to an increased claims history. If your insurer sees that you’ve made multiple claims within a short period (for example, if you’re involved in a couple of accidents), they may raise your rates as a way to mitigate the risk of further claims.
  
  
• Long-Term Impact:
  The more claims you make, the more expensive you become to insure, and over time, this could lead to permanent rate hikes, depending on your insurer and their policies.

3. Insurance Point System (Accident Forgiveness Programs)

• Points for Accidents:
  Some states and insurers use a point system to track driving behavior. An at-fault accident may result in points added to your driving record, which can lead to higher insurance premiums. Points may stay on your record for several years, depending on the state, meaning you could face increased premiums for a significant period after the accident.
  
  
• Accident Forgiveness:
  Some insurers offer accident forgiveness programs, which may keep your first accident from affecting your rates. However, these programs typically apply only to your first at-fault accident and often require a clean driving record before the accident.

4. Rising Costs of Repair and Medical Treatment

• Increased Payouts:
  If an accident results in significant damage to your vehicle or injuries to those involved, your insurer may have to pay out a larger sum in claims. In response, they may raise your rates to cover the higher risk of paying out large claims in the future.
  
  
• Rising Industry Costs:
  The overall cost of car repairs, medical treatments, and parts (especially with newer, more expensive vehicles) has been steadily increasing. As these costs rise, insurance companies often pass them on to policyholders through higher premiums.

5. State Laws and Regulations

• No-Fault Insurance States:
  If you live in a no-fault insurance state, your premiums could increase even if you aren’t at fault, since no-fault insurance allows you to file claims through your own insurer regardless of who caused the accident. In these states, insurance companies might raise your rates after an accident simply because of the increased number of claims they handle.
  
  
• Fault-Based Insurance States:
  In fault-based insurance states, at-fault accidents typically lead to higher premiums. If you’re not at fault, your rates may not rise as significantly, but your insurer might still raise them due to the risk of future claims.

6. The Impact of Insurance Premiums on Your Driving Record

• How Your Driving Record Affects Rates:
  Your driving record plays a significant role in determining your auto insurance premiums. A history of accidents (whether at-fault or not) shows insurers that you’re more likely to be involved in future incidents. As a result, your premiums may increase as you are seen as a higher risk to insure.
  
  
• State-Specific Guidelines:
  Some states regulate how long an accident stays on your record. In most cases, it could impact your rates for three to five years, depending on the severity of the accident.

7. The Role of Liability and Coverage Types

• Liability and Collision Coverage:
  If you carry only liability insurance and are involved in an accident where the damage exceeds your coverage, the insurer may have to pay out of pocket. To recover from these potential losses, insurers may raise premiums for customers who have a higher likelihood of needing to file claims.
  
  
• Comprehensive Coverage:
  For those with comprehensive or full coverage, your premium can increase due to the overall cost of the claim, even if it’s not your fault. Comprehensive coverage takes into account a wide range of incidents, including accidents, theft, and natural disasters.

8. Insurance Company Practices

• Customer Loyalty:
  Some insurance companies offer discounts for being a loyal customer, but others may raise rates after an accident regardless of your past relationship with the company. It’s important to shop around if your insurer increases your rates after an accident, as other providers may offer more competitive pricing.
  
  
• Risk Pooling:
  Insurance companies operate by pooling the risk of many customers. When a single customer’s risk increases (due to an accident), it could affect the overall risk pool, causing premiums to increase across the board. This is a standard practice, as insurers adjust their pricing to account for the collective risk of their policyholders.

Conclusion
An increase in auto insurance rates after an accident can be frustrating, but it is a result of various factors that insurers consider when assessing risk. Whether the accident was at-fault or not, your history of claims, the type of coverage you carry, and the overall cost of repairs or medical treatment all play a role in how your rates are determined. To avoid surprises, regularly review your policy, keep a clean driving record, and consider comparing quotes from different insurers to ensure you’re getting the best rates possible. Understanding these factors can help you navigate your insurance situation and manage your premiums effectively after an accident.

At McClain Matthews Insurance, we put our clients first by offering them policies that they can afford. Insurance is a necessity nowadays, and we're here to help you. Learn more about our products and services by calling our agency at (317) 298-7500. You can also request a free quote by CLICKING HERE. 

Disclaimer: The information presented in this blog is intended for informational purposes only and should not be considered as professional advice. It is crucial to consult with a qualified insurance agent or professional for personalized advice tailored to your specific circumstances. They can provide expert guidance and help you make informed decisions regarding your insurance needs.​