“Will a claim cause my car insurance rate to increase? “ This is one of the most frequently asked questions I hear when talking with a client about an accident. The short answer is yes. I don’t always know how much of an impact an insurance claim will have on any person’s specific renewal premium, but claims do have an impact on their rate.
No car insurance company evaluates a claim the same way. They all tend to rate claims differently based on diverse criteria but there are some commonalities among the companies including:
- Was there any bodily injury or death?
- Who was at fault?
- What was the severity of the damage?
- Was it a collision or comprehensive claim?
Any claim where someone was hurt will have a high degree of impact on the upcoming premium. If someone died or was seriously injured and you were at fault, many carriers will decline to renew your policy or charge you a crazy rate increase as a result. I’ve seen increases of 300% in some cases. The claim with the highest degree of impact is an at fault accident that occurred because of negligent behavior (DUI, reckless driving, etc.) and someone in the car you hit either died or was physically injured.
The next criteria most companies evaluate is who is at fault. Generally speaking, at fault accidents carry a higher degree of impact than not at fault accidents. Even when a claim is not your fault, there can be an impact on the rate at renewal time. The impact will certainly be less than an at fault accident but it’s pretty common to see a small increase after someone’s hit you.
Another common criterion is the severity of the damage. This is measured by the amount the insurance company pays to have your car repaired. Some companies have a threshold for claims and may not count a claim against you if the damage is less than $1,000. In these companies, a claim above the threshold will certainly impact your premium. It’s difficult to predict how much, but claims with a larger amount paid will impact your rate greater than ones with a lower claim payment. Fender benders are much better than major collisions in these instances.
Comprehensive claims are claims when something other than an accident happens and include: hail damage, an object falls onto your car, you hit a deer or other animal, the car is caught in a flood, etc. Comprehensive claims have a small impact on most renewal rates but the impact is less than the impact of a collision.
One final factor insurance companies consider is claim frequency. People who file claims on a frequent basis, even comprehensive claims should expect an increase rate when the policy renews. Insurance companies approach claim frequency differently, but someone who files multiple claims over a 3 to 5 year period will usually pay more for their car insurance than someone who’s only had one claim in the same period of time.
A recent study was conducted to measure the impact of a single claim on a person’s renewal rate. The results show drivers pay an average increase of 38% more for their car insurance after making a single claim. Texas drivers will pay about 28% more on average. Claims involving bodily injury and property damage, including collisions, resulted in premium increases of 42% and 41% respectively while non-collision claims resulted in an average rate increase of 2%.
This leads us to the question of when to file a car insurance claim. If the damage can be repaired for a few hundred dollars out of pocket, then it may make sense to pay for the repairs and not file a claim, but ultimately the decision to file a claim or not is up to each individual.
What do you think? Share your questions, comments, or experiences with me in the comments section of our blog or on our Facebook and Google + pages. I’d love to hear from you!