Why Do Auto Insurance Rates Increase Sharply After an Accident?

One of the biggest myths about auto insurance rates is that your auto insurance company increases your rates to recover the money they spent on your auto insurance claim. Not so. If that were the case, only your present auto insurance carrier would be interested in raising your auto insurance premiums. Your auto insurance rates will be slightly higher than they were pre-accident even at another auto insurance provider.

The auto insurance company looks at the accident as an indicator of risk. Just consider the cost of car repairs and in some cases, car replacement, pain and suffering payments, sometimes for more than one person and medical expenses. An increase in your auto insurance premiums would not likely put much of a dent in what the auto insurance carrier spent on paying out your claim.

The higher auto insurance rate reflects the risk of carrying you as a policyholder, and the likelihood that you might have another accident. It is true that you may still be able to find a better deal from another auto insurance company after an accident, but the rate will not be as low as it could have been if the accident and claim were not on your auto insurance record.

But don't despair, if you can keep your driving record clean for at least three years from your first auto insurance policy renewal after the accident, you can expect to get even better and more inexpensive auto insurance rates.