Well, it finally happened. You've been in a car accident. Fortunately, you have auto insurance to cover the damage, even though you may have been at fault. Now comes the big question: how much will your premiums go up as a result of this accident? If you weren't at fault, you'll be happy to know that your premium probably won't increase much, if at all. If you were at fault, the following information may help you to understand and anticipate the premium increase you might see.

Why does the premium go up?
Before considering how much your premium might go up, it's helpful to understand why an accident can cause your premium to increase. Very simply, actuarial tables indicate that people who have had at-fault accidents in the past are more likely to have them again. Insurance companies use this information to charge the premium that most accurately reflects your chances of having another accident in the future. People who are at greater risk for accidents should reasonably be expected to pay higher premiums. So if the rate does go up, it's nothing personal against you.

How is the premium increase determined?
In a nutshell, here are a few ways insurers commonly figure out the amount by which they'll raise a premium following an at-fault accident.

Percentage of base rate
Insurers typically follow the Insurance Services Office (ISO) standard of increasing your premium by 40 percent of their "base rate" after your first at-fault accident. A base rate is the average amount of all claims paid, plus the insurance company's processing fee. For example, if the insurer's base rate is $400, your premium after the accident will go up by $160. This means that if the premium was $300 before the accident, it will be $460 after the accident. Subsequent accidents would result in greater premium increases.

Percentage of your rate
Some insurers use a variation on this method. Instead of using a "base rate," they calculate the premium increase based on the premium you were paying before the accident occurred. Again, for the first at-fault accident, the increase would probably be 40 percent. Under this system, if the annual premium before the accident was $300, it would go up to $420 after the accident. Subsequent accidents would result in greater premium increases.

Safe Driver Insurance Plan
Both of the systems described above are based on the ISO's Safe Driver Insurance Plan, which is typically followed by insurers. The Safe Driver Insurance Plan lists different types of auto accidents and moving violations, and assigns a 'point' value (from 0 to 4) to each type based on the severity of the incident. These points are different than the points that the state department of motor vehicles charges against your driver's license to track your driving record. Under the Plan, as you accumulate points, you are assessed surcharges that generally result in higher insurance rates. The number of points charged determines a premium increase. For example, typically 3 points are charged if you're convicted of drunk driving, triggering a hefty increase. On the other hand, accidents that weren't your fault or for which you covered the losses out of your own pocket (i.e. deductible) generally don't result in any points. Such accidents usually won't make the premium go up at all.

Other factors
Other factors may also affect premium increases after an accident. These might include, among others, your location, your age, the kind of car you drive, and the "loss experience" of drivers similar to you (meaning total claims made by the group of similar individuals). Most of these factors are independent of the accident itself.  The premium might also go up at renewal time if you buy a flashier car that's more expensive to insure in the same policy year that the accident appended.

These same factors can also work to your advantage in some cases. If you turn 40 during the same policy year as the accident, you enter the lowest-risk age group (between 40 and 55) and may be eligible for a discount that will help offset the premium increase caused by the accident. The same is true if you get married during the same policy year, since married persons are considered a lower risk factor.

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Please Note: The information contained in this Web site is provided solely as a source of general  information and resource.  It is a not a statement of contract and coverage may not apply in all areas or circumstances.  For a complete description of coverages, always read the insurance policy, including all endorsements.