I had two interesting conversations over the past two weeks. One was with a client I was assisting with their car insurance renewal, the other was with a colleague who was working on a car insurance quote for a prospective client. Both of the conversations are worth sharing here as they provide a great lesson on how even a small claim can impact your car insurance rate.
In the conversation I had with my client, we were reviewing her car insurance renewal. The rate had gone up partly due to a small claim that didn’t cost my client a penny. She had a small chip in her windshield which she was told her insurance would pay to repair it, so it wouldn’t get bigger. The person telling her this was the repair shop, which went on to say the repair would not impact her insurance rate (see http://220.127.116.11/~wiseinsu/free-repairs-what-they-may-cost-you/).
The conversation I had with a fellow insurance agent was equally interesting. He was quoting the car insurance for a new prospective client and ran the CLUE report to determine if there were any prior claims which would impact the rate he was offering. There were 18 towing claims over a 3 year period.
In both cases, the free windshield repair and the 18 tows didn’t cost either person any money out of pocket when either the chip was repaired or the tow truck showed up. There were cost implications, however, in both cases which caused both individuals to pay more for their car insurance due to three key reasons.
In both cases, any activity that shows up means the current insurance company, or one new to them, will remove the “claims free” discount. That alone, means they are paying more for the car insurance than if they had no prior claims. The level of impact depends on the insurance company and ranges from 2% to 10%.
In the case of the individual with the 18 towing claims, there are two issues, claim frequency and multiple claims. Whenever there are two or more claims, the impact on the rate can be hard to swallow. In my client’s case, she also had a claim for a not at fault accident. Her rate increased about $500 a year, which didn’t seem fair, but it was still better than what it would have been had we moved her to another company.
In the case of the individual with 18 towing claims, the sheer frequency of claims in a three year period had a tremendous impact on the rate my friend offered him. Underwriters look at frequency very carefully and some companies will decline to offer a policy if there are more than three claims per driver in a given year.
The bottom line is there is no such thing as a car insurance claim which doesn’t impact your rate. Even the small ones which don’t cost any money from your pocket can affect your rate. I believe glass repairs and towing (roadside assistance) are helpful items to have on your policy, however, be judicious in how you use them.
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