How Does an Accident Affect My Car Insurance Rates?

How Does an Accident Affect My Car Insurance Rates?

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Plenty of car insurance companies like to boast their accident-forgiveness or safe-driving programs, which either waive rate increases or reward you for being accident-free. That's because accidents can majorly influence your annual car insurance rates. An accident, or lack thereof, can mean the difference of hundreds of dollars on your car insurance rate.

Comparing rates from multiple insurers, even after an accident, is still among the best ways to save money on car insurance.

Below, we will explore what counts as an accident — and what doesn't — and how one may affect your annual premium.

How much will your car insurance rates increase after an accident?

In our five-state study, rates increased 1.33x on average when our sample 30-year-old male driver was in an accident that caused injuries and car damage.

Accidents that only involved property or vehicle damage resulted in less-drastic increases, at an average of 1.23x.
Here's a quick example: Let's say your premium costs $1,000 a year. After an accident that involves hospital bills and car repairs, your premium could increase to $1,333. But it would only increase to $1,230 annually if the accident only causes damage to a vehicle.

Results vary by state. When we analyzed car insurance rates in Massachusetts, rates increased 1.48x after an accident — while in Pennsylvania, rates only increased 1.16x.

There was also a large discrepancy among insurance companies.

  • State Farm, for example, averaged only a 1.20x rate hike across the states we studied.
  • GEICO had an average hike of 2.18x.

After an accident, your state's laws and your insurer heavily influence the impact to your rates. That's why we always urge consumers to compare quotes — the same driver and accident can be treated very differently among various insurers.

What do insurers consider a car accident?

To answer this question, we looked into how the five largest auto insurance companies in Alabama calculated their quotes:

State Farm says an accident occurred when a claim "totals $750 or more under property damage liability coverage and collision coverage combined." The accident must also be at least 50% the insured driver's fault. GEICO has a similar rule but puts the claim threshold at $500 for certain risk groups.

Allstate considers whether the driver is a new or longtime customer. For policyholders who are new to the company, an accident is defined as any incident that results in property damage, injuries or death. Longtime policyholders must submit a claim of at least $500 for the incident to be considered an accident. The driver must also be at least 50% at fault.

Progressive and Farmers have a similar system. These insurers won't increase rates for new policyholders if they're 0% at fault in an accident. Progressive customers who renew their policies must be less than 51% fault, while Farmers requires less than a $400 payout.

We chose Alabama because it was the only state that had complete information for all five companies. While certain factors may change between states — such as the severity of the rate hike or determining fault — what broadly defines an accident should more or less be constant between states.

What doesn't count as an accident

Defining what isn't an accident is more complicated than defining what is. But most insurance companies consider the driver's fault in an accident.

Some insurers check whether the policyholder is at least 50% at fault. If you don't meet this threshold, then your insurer won't increase your rates. There are exceptions; for example, some insurers don't follow this rule for new customers. But proving fault in an accident is difficult.

According to State Farm, the policyholder isn't at fault if they were:

  • Lawfully parked.
  • Reimbursed by, or on behalf of, a person responsible for the accident.
  • Rear-ended and not convicted of a moving traffic violation in connection with the accident.
  • Hit by a "hit-and-run" driver, as long as the accident is reported to the proper authorities within 24 hours.
  • Not convicted of a moving traffic violation in connection with the accident, but the other driver is.
  • Reporting damage caused by birds, animals, missiles or falling objects.

Allstate, Progressive and Farmers have similar policies in Alabama, though with a few more provisions. GEICO and Allstate won't increase rates for firefighters and police officers who are involved in an accident while on the job. And if the accident is a result of tire failure, Farmers doesn't count it as an accident.

Time is also an important factor when it comes to defining an accident.

Generally, all companies focus on the three years prior to your policy start date. So if you were involved in an accident five years ago, it generally won't be considered when calculating your rates. But this time frame may not apply to some accident forgiveness programs.

Other factors that affect rates

Even after an accident, your rate might not increase by much because insurers consider several factors before adjusting your premium. For example, age can affect your insurance rates. Or, your insurer may waive rate increases after a qualifying accident. (This is typically limited to one accident during a specified time frame.) Here's what else might temper the rate hike:

Age: Insurers know that younger people are high-risk drivers and price their premiums accordingly. So after an accident, a younger driver's rates might not increase by much because they're already high. For example, when an 18-year-old gets into an accident in Alabama, their rate increase is 7% lower than a 30-year-old's increase. We got similar results in two other states.

Number of violations: Your insurer will check whether you've been involved in other accidents — and how often. For example, four qualifying accidents within three years can result in a rate hike of 2.25x in Alabama and 2.14x in Massachusetts.

Mark is a Senior Research Analyst for ValuePenguin focusing on the insurance industry, primarily auto insurance. He previously worked in financial risk management at State Street Corporation.

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.