VIEWS: 24 PAGES: 1 CATEGORY: Auto & Home Loans POSTED ON: 4/1/2011
Car crashes can be financially devastating if you don't have insurance.
Does Insurance Go Up After a Small Accident? Several factors determine whether your premiums rise after an accident. When you buy auto insurance, you probably consider the price of the policy as one of the most important factors when making your decisions. While it is important to find a quality policy that fits into your family's budget, the initial price may be misleading because a change in your driving record, such as having a small accident, might significantly change the size of the premiums you pay. Policy Language o Insurers must file with their state regulatory agencies regarding how they will raise premiums after accidents. This state filing includes the parameters under which the rates go up, as well as the percentage. Therefore, because insurers are only loosely guided by state laws and can generally create their own surcharge systems, there is no uniform answer about when and how much your premiums increase. Some insurers forgive their customers' first accidents, some have a sliding scale of surcharges, and some simply follow standardized guidelines for the industry. Read your policy language to see how your insurer sets surcharge guidelines. Negligence o Generally, if an accident is not your fault, your premiums will remain unaffected. A large accident where you are not responsible has a smaller impact on your insurance than a small accident for which you are responsible. Some insurers, in states where fault is attributable, can assign comparative negligence, meaning that each party is partially at fault for the accident. For example, you may only face a premium surcharge if you are found to be 51 percent or more responsible. Severity o According to Insure.com, some states have laws that define chargeable accidents as those where your insurer pays out more than $500 to $750, depending on the state, after you pay your deductible. In other words, If the total damages are $900 and your deductible is $500, the insurer payout would only be $400. This would be below a state's chargeable threshold and would not result in a premium increase for you. This benefits people with higher deductibles because it reduces the chances of small accidents crossing your state's chargeable threshold. Amount of Increase o Again, insurers are generally able to set their own rules regarding premium surcharges. Some, however, follow the Insurance Services Office guidelines. ISO is a neutral party that sets standards and guidelines for the insurance industry nationwide. ISO guidelines recommend an increase of 20 percent to 40 percent of an insurer's base rate after a negligent accident. For example, if the base rate is $600 annually, an accident surcharge might increase the premium by $240. Even if you pay below the base rate, due to policy bundling or other discounts, the surcharge is calculated by the base rate.
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