How does an auto insurance claim affect your policy?

by Guest » Thu Jan 10, 2008 05:47 pm
Guest

When you make a claim on your auto insurance policy, the insurance company begins to consider you as potentially risky. Hence, a claim does, in normal circumstances, increase your auto policy premiums.

Why does a claim increase your policy premiums?

When you make a claim after an accident, your insurer may have to pay for:
  • Medical treatment for you and your passengers (if any)
  • Repair damage to your car or any other property
  • Your lost wages and any other damages
If it happens that the other party involved in the accident is uninsured, your own insurance company will have to bear the expenses and this can be quite expensive. After the insurance company pays you against a claim, they will try to recover the amount paid to you, but in most cases they won't be able to get back the entire sum. So, when they renew your policy, they will ask you to pay higher premiums to counter any future risk of a claim.

Are there other factors that affect auto policy premiums?

Claims alone don't trigger increase in insurance rates, there are also few other factors that may influence your insurance premium. Some of the factors may be directly related to you and some may not be.

Here are few other common reasons why your premiums might go up:
  • Receiving a traffic ticket: Your receiving a ticket, may not pose any threat to the insurer, but that definitely makes you a risk. Tickets for traffic violations reflect carelessness in your driving and hence insurance companies see you as higher risk which means higher rates for you.
  • Too many claims paid by the insurance company: You may not have been the claimant, but the insurance company might have paid a lot of money over claims made by other policy holders. In such a case too, your premiums might go up. You may not have anything to do with this, but since there had been too many claims made by other policyholders, the insurance company may decide to increase the rates of every policy holder in their company.
  • Adding a new driver to your policy: Each time you add a new driver to your existing policy, your rates will go up. Irrespective of what age the driver is, or the driving record, your auto rates will go up. If the new driver is a teenager or someone with a not so good driving record, companies make greater increase in rates.

Does a claim for PIP coverage in no-fault state affect premiums?

Claiming Personal Injury Protection (PIP) or First Party Benefits in a no-fault state does not increase your auto insurance rates. If you make a claim, your PIP coverage will compensate up to the coverage limit after which the additional medical bills can be transferred to your health insurance.

One thing to remember here is to not make your health insurance a primary means. If you do make it primary, then in case of any medical bills, your health insurance will kick in before PIP, even in an auto accident.

How can you avoid an increase in premium rates?

The best way to prevent an increase in premiums would be to avoid accidents and traffic tickets. But some companies offer policyholders an accident forgiveness program. These programs are designed such that you (policyholder) can be forgiven for minor accidents up to a certain number of times and your insurance rates will not increase. However, there are limitations to the number of times or the frequency of accidents beyond which your rates will go up.

Insurers have excluded major accidents from the program and if you have a claim for a major accident, you may be disqualified for the program for as long as it reflects on your policy. Again, tickets for Driving under Influence (DUI) may also prevent you from qualifying for such a program. So, if you want to qualify for this program you need to have a good driving history with no claims for a major accident.

I live in Pennsylvania, which is under a 'No Fault' system. What happened was me, along with 3 friends were involved in a car accident;my friend was the driver. A car hit us from the side, hitting the front of our car, and we had the green light. The driver of the other car was technically at fault, and now the real problem I'm facing is this: We all went to the ER to get checked on, the bill comes to us, my friend tells me he's claimed us all into his insurance for medical coverage, BUT his insurance tells him that because it's a no-fault law, we are each suppose to claim the accident ourselves to our own insurance/parents insurance...which doesn't make sense to me at all. His company is Allstate, and I've talked to the representative and did my research. According to the representative, if I claim with my dad's auto insurance, the bill will be taken care of and his premium will not rise, but where's the logic? Why would my dad have to claim me if it had nothing to do with me when the responsibility is on my friend? Plus, he(dad) called his company and they told him his premium would rise. So now i am stuck, and unsure of what to do. The bill itself is $800.00 and there is no reason why I should pay out of my own pocket or increase my dads premium because of this. Can anyone provide any help as to what I should do..? Why isn't the driver allowed to claim all of us in his medical coverage? Why do we each need to claim this separately to our own coverage when the driver is to be responsible? thanks for any comments

Total Comments: 49

Posted: Mon Mar 15, 2010 11:09 am Post Subject:

helpme, If she was not at fault, then the claim will not be coded as "chargeable" (meaning no rate increase)...I assume the other carrier is handling the damages?

Posted: Wed Mar 17, 2010 06:35 pm Post Subject:

All the answers have some merit and I'm sure helped clear things up. Maybe I'm in need of new reading glasses, but I thought this was the health forum...not the auto insurance forum.

Steve Benedict

Posted: Mon Jun 14, 2010 02:52 am Post Subject: File an claim

If I file an auto accident claim, the insurance will raise the premiums. However, if I don't file an auto accident claim, will the insurance still raise the premiums or no? Or does the insurance raise the premium no matter what?

Posted: Sat Feb 12, 2011 08:23 pm Post Subject: How long does it last.

How long does it last? Because i was trying to get insurance and some don't want u to get it with them....

Posted: Tue Apr 12, 2011 02:47 pm Post Subject: should I file a claim?

I am worried my ins will be cancelled. Totaled a vehicle in 2008, this past weekend had a parking lot fender bender, some tricked out car with custom parts, backed into it going 1mph, can barely see damage, estimate is $1900 - USAA is ins co., how will this affect my policy? Might they cancel me?

Posted: Mon Apr 18, 2011 01:23 am Post Subject: hail damage to my auto

We had a hail storm & my car received $1100 in damaged. I have a $500 deductible. Should I turn this into my insurance company? I don't want my rates to go up

Posted: Mon Apr 18, 2011 01:05 pm Post Subject:

In both instances above, filing claims with your insurance carrier MAY have an effect on future coverage or cost. If you were at fault for a collision, or suffered a covered "other than collision" (AKA: "comprehensive") loss, your insurance will pay the claim (minus any deductible).

Comprehensive claims, such as hail damage, probably will not affect the risk/rates. But if you told your insurance company that you park the vehicle in your garage at night, and they determine that the damage resulted when your car was not garaged as it "should have been", they could deny issuing comprehensive coverage entirely in the future.

In the case of a minor fender bender (no one drives "1 mph" -- people walk faster than that), the fact that you were at fault is a future risk factor . . . inattention at a slow speed, perhaps that also is indicative of inattention at higher speeds. It could easily increase your rate. The amount of the claim itself has little bearing on the risk.

In either case, if you don't want the insurance company to become involved, even though they might learn of the incidents later, just pay for the damages with your own resources, and it's mostly a non-issue.

Posted: Thu Jun 09, 2011 01:18 pm Post Subject: PIP claims from the other driver

I reently was invlved in a an accident. (1st 1 in 20 years)Our damage was to the sides, no major impact. There were NO injuries... I beleive it was his fault, yet my insurance company paid for his car repairs and is now considering a large PIP claim payment. They have admitted that they do not believe his injuries yet they are negotiating a settlement amount... Unbelievable!..How will this effect me in my record and rates with another insurance companies.

Posted: Thu Jun 09, 2011 04:38 pm Post Subject:

If the accident was your fault, there is not much you can do about it. One accident will have some effect on your premiums, but each company will apply its own standards to your overall risk. There is no standard answer to this question.

Posted: Fri Jun 10, 2011 03:40 am Post Subject:

hm, thank you for sharing this insights... really helpful...

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