Does filing a claim increase car insurance? In most cases, yes. That’s because insurance companies calculate costs based on risk and drivers who file claims are considered a risk.
Car Insurance Claims: The Basics
Car insurance, simply put, is a contract between you and your provider. Your provider enters the contract by promising to provide financial coverage after an accident or other emergency. You hold up your end of the contract by agreeing to pay a premium. According to Investopedia, a car insurance claim covers the following:
- Medical and health-related expenses.
- Death benefits.
- Car crashes.
- Incidents related to home damage.
Policyholders have the option of filing a claim on paper or electronically. Let’s say you’re in an accident where you hit someone else’s vehicle with your car. You must report the accident to your insurance company if you want them to cover the damages. If the other driver hits you, your company might still require you to report the incident.
After you file a claim, your insurance company will investigate it to make sure it’s legitimate. As Investopedia points out, your insurance company may reject your claim, and you’ll have to pay for any damage out of pocket. If your provider approves your claim, they’ll send a check to you or your mechanic to cover the repairs.
PolicyGenius notes that when you purchase an insurance policy, your provider factors in your driving history when calculating your rates. Your history is a good indicator of how much of you’ll be for your company to insure. If you file a claim or you’re involved in any traffic violations after you purchase your policy, your risk factor changes, so it makes sense for your provider to recalculate your rates.
When you file a claim after an accident for which you’re at fault, your property damage liability insurance will pay for the damages to the other driver’s vehicle. Bodily liability coverage will pay for their medical bills. If you have comprehensive and collision coverage, your vehicle should also be covered after you pay your deductible.
How Does Filing a Claim Affect Insurance Rates?
Whether you’re at fault or not, the number of claims you file can have an impact on your insurance rates. Bankrate states that drivers who file more claims pay higher rates. If your provider decides that you’ve filed too many claims, they can choose not to renew your policy. This is especially true if you file several claims in a short period of time.
If you’re at fault in an accident, you can expect your rates to go up after you file a claim. However, if you’re not at fault, your insurance company may decide not to raise your rates. For example, if your car gets hit in a parking lot or a tree falls on your garage, you’re clearly not at fault. Of course, each company varies on how it decides to raise rates.
Suppose you file a claim and you’re not at fault. In that case, Investopedia notes that your insurance provider may review factors such as how many claims you’ve made in the past, the number of tickets you have on your driving record, the number of natural disasters in your area, and your credit score. All of these factors may cause a rate increase even if your latest claim is not your fault. However, some insurance companies may forgive your first ticket or a minor accident.
According to Investopedia, after you file a claim you could see your rates increase by 20 to 40 percent. This rate increase could stay in effect for years. The typical rate increase lasts for two to five years, depending on the provider. If your provider decides not to renew your policy, you might have to purchase high-risk insurance, which comes with even higher premiums.
As PolicyGenius points out, each insurance company has its own practices when reassessing your rates. A provider typically sets a claim amount that will trigger a rate increase if you’re at fault in an accident. If you happen to file a claim that exceeds the trigger amount, you’ll see your rates increase.
Providers also establish their own rules when it comes to what constitutes an unacceptable driving record. Typically, the more accidents you have, or the more tickets you receive, the likelier it is for your company to cancel your policy when it’s up for renewal. Some violations, like a DUI, will automatically trigger a refusal to renew.
Different types of claims will cause your insurance policy to increase by different percentages. According to WalletHub, these are the increases you can expect, on average:
- Bodily Injury, At-Fault Claim: 32 percent increase.
- Property Damage, At-Fault Claim (Damage Over $2000): 31percent increase.
- Property Damage, At-Fault Claim (Damage Under $2000): 26 percent increase.
- Comprehensive Claim (Damage Over $2000): 3 percent increase.
- Comprehensive Claim (Damage Under $2000): 3 percent increase.
Should You File a Claim?
Whether you should file a claim depends on your specific needs and your provider. As Investopedia points out, if your provider has a rule in place to forgive your first accident, then it won’t do any harm to file a claim. The same can be said if you know that your provider won’t hold previous claims against you if you have to file another claim.
When you first purchase your insurance or discuss a renewal with your agent, you should have them clarify how filing a claim will affect your premiums. You don’t want to wait until you have an accident and need to file a claim because your agent may be obligated to report potential claims to the company.
Investopedia suggests that you minimize the number of claims you make if you want to keep your premiums down. A small dent on your bumper isn’t worth the cost of higher premiums. However, if your car is totaled, you’ll want to file a claim. Keep in mind that filing any claim might give your insurance provider a reason not to renew your policy.
Check this out if you need additional information, resources, or guidance on car insurance.
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