Study: Even First Accident Claim Raises Car Insurance Rates For Years

January 28, 2015

Afraid that making just one auto-insurance claim will raise your rates?

That fear is entirely justified by the results of a new study—pointing to a premium rate hike of 41 percent, on average, after making just one $2,000 claim. That’s about $370 annually, on average, and a premium that could haunt you for several years.

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California is the worst, with an 86-percent rise in premiums, while Massachusetts is second with an 83-percent rise. Although those top two are far above the rest, New Jersey, North Caroline, and Minnesota occupy the rest of the top five.

Maryland, Michigan, Montana, Oklahoma, and Mississippi rank among the states where premiums increase by the smallest percentage after one claim.

According to InsuranceQuotes.com, which commissioned Quadrant Information Services for the study, one of the key differences between states is how they treat bodily injury claims. While the average property damage claim for an auto incident in 2013 cost just $3,231, the average bodily injury claim was $15,443.

While not all claims cause a spike in premiums (vehicle theft only rose premiums slightly), the results run counter to what several insurers, like Liberty Mutual, claim in advertising: that rates won’t rise from a first claim. Small print in the commercial (below) says that Accident Forgiveness is subject to the terms and conditions of the company’s underwriting guidelines; that it may vary from state to state; and that it isn’t available in California.

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Most major insurers, like Allstate, Progressive, GEICO, and State Farm, now offer some form of accident forgiveness in most states. Getting a policy with that language typically requires some form of premium coverage and adds ten percent or more to the policy costs.

The averages use data from six major carriers in all 50 states using the profile of a 45-year-old married female driver, of a 2012 sedan, employed, B.A.-college educated, with no lapse in coverage or previous claims.

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