Laura Berry is a former State Farm insurance producer and insurance expert.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Oct 26, 2021

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Here's what you need to know...

  • Research has shown that car insurance rates increase by an average of 40 percent after an accident.
  • Insurance companies increase premium rates when the level of risk associated with a policy increases, and an accident is the fastest way to enhance the assumption of risk.
  • There are many factors that may determine how much your rate increases, including the number of accidents you’ve experienced in the past.
  • Accident forgiveness policies may protect you from rate hikes after an accident.

When a vehicle speeds past you on the highway or veers over the center line in your direction, your insurance rates flash through your mind. Many assume that your life flashes through your mind as you worry about your safety, but spikes in car insurance rates are just as worrisome for most people today.

If you’re one of the millions already struggling to pay your insurance premium on time, you know that one mistake could send your rates soaring. You could spend a long period of time attempting to recover financially from a hike in your insurance costs.

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It’s impossible to predict exactly how high your insurance rate may go after an accident because every insurance company has their own formula for determining premium prices. Rate increases also vary depending on location, so you may experience more or less of a hike due to your zip code alone. Some studies have shown that rates tend to increase by approximately 40 percent after an accident, but there are many factors that may alter that percentage for your policy.

What are five factors that may impact your post-accident insurance rate?

An insurer can raise rates when the amount of risk associated with the policy increases for any reason. Those premium increases are no laughing matter for any driver; an insurance policy is necessary but stressful to deal with even without fluctuations in price. While each company has their own formula which places more emphasis on some factors than others, there are some risk factors that are known to trigger premium hikes. If you’re involved in an accident, you can ask the following five questions to determine whether your insurance rates are likely to jump up substantially.

1. Were you at fault?

Your insurance rate is more likely to increase if you were at fault, but you may still see a small increase in price even if you weren’t at fault. The insurance company wants to spend as little money as possible on your claims, so they count every dollar expended as an increase in risk for your policy. Once you inform them that you were involved in an accident, they could determine that you’re a higher risk than previously assumed, and they will likely increase your rate even though you couldn’t prevent or avoid the accident.

What happens if you’re involved in a no-fault accident? You may file a claim with your insurance company if you have no-fault coverage, but that increases your risk of experiencing a premium hike when it’s time to renew your policy. If you have the ability to pay for the damages out of your own wallet, you may consider that a cheaper alternative.

2. Was this your first accident?

The more accidents you endure, the more your insurance company must pay out on your behalf, and the more you can expect to pay for future coverage. Even if you’re involved in multiple accidents that were not your fault, the insurance company may view you as more likely to collide and crash than other drivers. One minor accident may not seem like enough to consider you an unsafe driver, but you never know when the next accident will come your way. After a while, your auto insurance policy will end up costing a lot more than when you had a clean driving record.

3. Have you filed other claims in the past?

If you’ve filed claims for hail damage, car theft, and other incidents that didn’t involve a collision or crash, your insurance company may factor those expenses in when determining your risk factor. If you file a lot of claims, they will consider you risky regardless of the reasons behind the claims, and your auto policy price will go up accordingly. Most companies have strict guidelines that they follow in order to determine how much a driver pays. Safe drivers are typically rewarded in the sense that they don’t see an increase in what they pay.

4. Did your accident involve another vehicle, passengers or pedestrians?

If you’re proven at fault for an accident or collision that involved another driver or another person’s property, your insurance company is more likely to deliver a substantial rate increase for your policy as a result of your reckless driving. Not only do they have to cover the damage to your vehicle and pay the medical bills for your passengers, but they also have to cover the damages sustained by others involved.

You may struggle to pay your deductible after an accident, but that figure is likely to come nowhere near the price your insurance company pays to cover all damages in the aftermath of the incident.

If it turns into a court battle with others involved in the accident, your insurance company may drop your policy altogether. Many states have laws that protect drivers from losing their insurance after a single accident, so study the laws in your state to determine your rights. You can also look into taking defensive driving courses so that your driving history won’t be too blemished.

5. How severe was the damage?

The more damage sustained, the more the insurance company must pay out on your claim. There are a lot of theories about thresholds that may trigger an increase in policy rates, but there are so many factors involved that you can’t count on those theories proving correct in your case. In general, many professionals believe that a claim for less than $2,000 is unlikely to increase your rate if it’s the only claim you have filed.

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Will accident forgiveness protect your rate?

Insurance companies are always searching for ways to attract and retain the best drivers, and accident forgiveness is one of the newest marketing strategies. The promise is that the insurance company will ‘forgive’ your first accident, meaning they won’t increase your rate if you have an otherwise clean driving record. The terms surrounding these policies vary from one company to the next, but in most cases, this applies to your first at-fault accident.

While this type of policy may give you some peace of mind if you’re ever involved in an accident, there are some limitations of accident forgiveness that you must consider. Some insurance companies may charge you a higher rate right from the start if you want this type of protection, so it’s important to compare rates online before agreeing to a policy. Also, the insurance company can still refuse to renew your policy after you have your first accident. When you apply to other companies for a new policy, that accident isn’t forgiven and will factor into your rate.

How about we end on a positive note?

Determining how much your insurance rate may increase after an accident is enough to make most people want to cry, but it’s worth noting that an increase is often merely for a finite time period. Insurance companies don’t want to penalize their customers forever because they have to compete with other companies to retain those customers and stay on top of offering competitive, average rates.

If your accident is followed up by a clean record and years of safe, incident-free driving, you will eventually return to a lower premium. How many years it takes to get there will vary, since it’s different from company to company. There are other factors that affect the risk level associated with your policy as well, and for comparative purposes, you may want to look into what those factors are ahead of time.

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