Statistically, every person who uses the road is bound to be involved in an accident of medium damages at least once in twenty years, whether he/she drives or not, is a responsible person or not. So if you are one of those who are hooked on to the cell phone or heavy metal or the type who just invites bad luck like a deer dashing out of the woods and ramming into the side of your car, you might want to be aware of the consequences awaiting you. Of course, a couple of broken bones or damages to your beautiful car kept aside; there is this minor detail about your car insurance that pays for your little misdeed. In case you haven’t heard, yes insurance companies increase the prices for you if you’ve been in an accident and they settle it for you.
Hold that thought in your head. For that is the most common doubt in this case. No, the insurance company would not try to make you pay back the amount they paid in damages! Because, if you totalled your VW and you had to pay $30,000 to the other party involved in the accident, paying the whole amount back is not a deal right?
But yes, the rate of increase of your insurance cost when you renew depends on the amount the company paid out in damages. But this does not mean that a clever financial plan is devised to get all their money back in an amount of time. This is explained more as you read further. But if you are in an accident such as a deer ramming into your car, the case would be comprehensive and your rates would not be increased against the amount settled. As it is unlikely that the deer would run into your car again or that the PETA would come after you to sue on the deer’s behalf right?
So what could be the rate of increase?
The rate of increase in your insurance plan would be anywhere between 20 to 40 percent. The insurance policies are designed to charge premiums based on the amount of risk the client is in. So if you get into a bigger accident the rate of increase in your premium will be higher because of the bigger claim that the company had to settle on your behalf. Also any special offers that you might have availed till them could be withdrawn
Will I be charged higher rates forever?
Of course not. The State Insurance Boards definitely take care that they don’t. Normally, the companies charge you higher rates up to three years after your accident. This doesn’t mean that your premiums are going to increase. Suppose you bought insurance from October to April and had an accident somewhere midway, you would be charged higher rates from April when you go to renewal till two Aprils after that. Since, you’ve already been in one, while considering you for the insurance companies deduce that you are in the chance of getting into another accident in three years. Your rates will come down to normal after that.
Now that you know all the facts, you might want to reconsider chatting up your girlfriend while you’re in the car.