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How to lower your car insurance after an accident

Mediafeed logo Mediafeed 8/6/2021 Aaron Crowe
a woman talking on a cell phone: A woman contacting car insurance after an accident © monkeybusinessimages / istockphoto A woman contacting car insurance after an accident

At some point in your life, you’ll likely have to deal with a car accident. In 2018 alone, there were over 6.7 million recorded traffic accidents. Thankfully, the majority of accidents only involve property damage and no injuries. But to anyone who has been in one, an accident can be quite a stressful situation.

Unfortunately, accidents can not only cause physical harm, but they can hurt your wallet too. And if an accident is ruled your fault, this usually comes in the form of increased auto insurance premiums.

Most drivers assume if you’re at fault for an accident, your car insurance premiums will skyrocket. And in some cases, this can be true. But the good news is, with a little effort, there are steps you can take to help offset the increase.

How to lower your car insurance rates after an accident

Here are several tips for tackling your auto insurance premiums after you have an at-fault accident. Most are actions you can take right away.

1. Communicate with your insurance company

Making sure your insurance carrier has all the details is the first step.

If you’re in an at-fault accident, you don’t have a choice but to file a claim.

Where it gets trickier is when you may or may not be at fault but no one was hurt and only a minor amount of damage was caused. It’s tempting to skip the insurance altogether, especially if you fear the increased premiums.

But leaving your insurance company in the dark is taking a big risk. The other driver involved in the accident could file a lawsuit after a few weeks or months later. If you failed to report the accident to the insurance company, the carrier could refuse to cover your legal bills from the lawsuit, plus any other payments the driver is asking for.

If you had to pay out of pocket, the costs could be enormously high — much higher than an increased premium would ever cost.

The bottom line, even if there is only a minor amount of damage, you’re better off communicating with the insurance company.

2. Review your policy

Most people only pay attention to their policy details when it comes time to purchase their policy. And when you’re putting the details together on your coverage, it’s hard to imagine having to use your policy for an accident one day.

But after an accident, it’s time to dust off the dec page and review what coverage you have. It’s also time to review potential changes to your policy.

3. Accident forgiveness

The first item to check on your policy is if you paid for something like accident forgiveness. Accident forgiveness typically allows you one at-fault accident without your premiums going up.

If you do have this coverage, hold your excitement for just a bit. Many insurance carriers only forgive your first accident with them if you’ve been accident-free for the last five years, no matter who your carrier was. Or there may be some other limitation set by the insurer. In other words, read the fine print.

4. Make modifications

If you want to stick with your insurance provider, you can always modify your policy to help offset the cost of an accident.

Examples of modifications could include dropping collision coverage or bundling your insurance policies such as homeowners or life insurance. There may be extra convenience coverages, such as roadside assistance or mechanical breakdown coverage, you could learn to live without.

Reviewing your insurance coverage after an accident allows you to spot any gaps in your coverage or areas where you may be over-insured.

Don’t forget to review your commuter settings. Many drivers are working from home instead of driving long commutes. If this is the case for you, you might be able to reduce your usage with low mileage discounts.

5. Increase your deductible

While you’re reviewing your policy, look at increasing your deductible. The deductible is the amount you’re responsible for out of pocket (before insurance kicks in) if you have a claim. You can lower your auto insurance rates if you select to pay a higher deductible if you feel you'll maintain a good driving record after your accident.

According to the Insurance Information Institute, if you increase your deductible from $200 to $500, it could lower your collision and comprehensive coverage cost by 15 to 30%. If you want to save a chunk of money, increasing to a $1,000 deductible can reduce your premiums by 40%.

Increasing your deductible is an immediate impact on your premium. But the catch is, you need to have the money in the bank to cover the amount in case you do have to pay out of pocket.

It doesn’t do you any good to have to pay a higher amount and then be forced to scramble to pay your deductible. Always have enough in your savings to cover an unexpected cost for your deductible.

6. Review all car insurance discounts

The number of discounts offered from one insurance carrier to another varies. But some companies offer a slew of options — some you may not be aware of. After an accident is a perfect time to review all available discounts to make sure you’re taking advantage of them all.

Be sure the information about your car includes safety features like airbags, anti-lock brakes, anti-theft devices, all of which lower car insurance costs.

But other driver discounts may not be as well-known.

You can ask about discounts for being a good student, leaving your car at home while you’re away at college and defensive driving course discounts.

There may be others too, such as being affiliated with certain clubs or volunteering for so many hours a year. Or if you pay your premiums upfront for a year it can reduce your payment by as much as 12%.

And if you’ve significantly reduced the number of miles you drive each year, it’s beneficial to bring it up. You can get a discount based on lower usage.

This is where it pays to ask lots of questions and make sure you’re taking advantage of the most simple opportunities to save money. Don’t rely on your insurance agent or an online portal to bring it up — otherwise, you may never get additional discounts if you’re waiting on them.

7. Take a defensive driving course

Taking a defensive driving course, or driver safety course could be a practical way to not only learn safer driving habits but also get a discount.

If the thought of taking a defensive driving course makes you think of falling asleep while you learn traffic laws, don’t worry. Today’s defensive driving courses offer a wide range of teaching mediums. From online-only courses, video modules, to live instruction and quizzes. You can even take a course on your smartphone.

You can take the class at your own pace and convenience. Just make sure the company you’re using can get you the hours you need to qualify for an insurance discount.

Also, look for a course that offers you a money-back guarantee and provides a detailed outline of the course expectations. Like car insurance, you can shop around for prices but the bargain option may not be the best.

8. Switch to a usage-based policy

In the auto insurance world, there are policies you can purchase based solely on your usage — or the limited number of miles you drive. If you drive your car less than 10,000 miles per year, you owe it to yourself to check out a usage-based policy.

These same programs also measure your quality of driving. Habits such as frequent stopping/braking, speeding, and other habits are recorded and reviewed. You can earn discounts for being a “safe driver” — even if you have an at-fault accident on your driving record.

Many of the major companies have this program. Usually, you install an app and some sort of Bluetooth device that monitors your mileage. This is called a telemetrics program.

These programs have become increasingly popular so you’re likely to find a version of it with your company. State Farm has the Drive Safe & Save, Progressive has the Snapshot, and Allstate has Drivewise, to name a few.

You might feel as if big brother is always watching you when you’re using a program like this. But with the potential discount and lower premium, it may be worth it to you to sign up for it.

9. Start shopping around

One of the best ways to save money is to shop for new insurance. You may love the agent you’re working with, or love the customer service from your current provider. But you can also love saving money, which means you may have to break up with your current carrier.

The rates from one insurance company to the next can vary tremendously. You might be surprised to find the exact coverage could be hundreds of dollars less just by choosing a new one.

10. Use a service like Gabi

Most people don’t want to go through the hassle of switching insurance companies because it’s such an inconvenience to gather multiple auto insurance quotes.

Your options for getting quotes are either: work with an agent, work with an independent insurance broker, or go to each website and put in your information. Oh, don’t forget you can use an online comparison tool where they proceed to spam you every five minutes with calls and texts.

If none of these options sound appealing to you, then you should try Gabi. Gabi is an online comparison tool but it’s different from the spammy ones.

First of all, Gabi doesn’t sell your information to third parties. Gabi only makes money if you decide to purchase an insurance policy through them (the money comes from the insurance company).

Secondly, Gabi uses artificial intelligence to compare your policy to over 40 car insurance companies. You simply upload a copy of your current policy so Gabi can get to work. The result? You can see how your insurance rates compare with other carriers.

If you find something you like, then great. You can call, text, or email them and they’ll finalize the details for you. If not, you can move on.

No matter how you end up getting multiple quotes, it’s worth the time to compare other sites. This is one of the best ways to immediately save money on premiums, whether you’ve had an at-fault accident or not.

11. Improve your credit score

What does your credit score have to do with your premiums after an accident? Turns out, your credit is a factor in how much you pay. Insurance companies use credit scores to determine a person’s level of risk for an accident.

The lower your credit score, the higher your risk, according to the insurance companies.

For the long term, improving your credit score can help lower your premiums. What are the best ways to get your credit score up so you can start saving?

  • Review your report for free at annualcreditreport.com
  • If you find any discrepancies on your credit report, work to get them cleared up
  • Sign up for a free credit-monitoring service such as one through your bank or credit card
  • Always pay your bills on-time
  • Keep paying down your debt

These simple acts of financial responsibility can add up to big changes in your credit profile. Not only does this help you with your auto insurance, but can lead to lower interest rates for car loans, mortgages, and other products.

The impact on premiums after an accident

If you read the above list you might be wondering if it’s worth your time to go through the process to get your premiums lowered. After all, how much could the rates jump up?

I hate to be the bearer of bad news, but according to a joint study between Quadrant Information Services and InsuranceQuotes, the average increase is 44.1%. And if you have to make a second claim in a year? I’m afraid it gets worse - the increase jumps to 99%.

To put this in perspective, if your annual premium is $1,000, then your new rate would be $1,441 annually.

Your premium rate hike is tied to the type of claim you make. A single, bodily injury claim can push your premiums up 48%. Whereas a collision claim (if your car was damaged by a falling object) would increase your premium by 2%.

Not only does the type of claim affect the rate, but so does your location. Some states ding you quite a bit more versus others. This could be based on several factors, but it’s mostly due to individual state regulations.

Here’s a snapshot of the states with both the highest and lowest increase to premiums after a $2,000+ claim.

Highest increase % premium increase:

  • California 63.1%
  • New Hampshire 60.3%
  • Texas 59.9%
  • Massachusetts 57.3%
  • North Carolina 57.3%
  • Lowest increase % premium increase
  • Kentucky 30.6%
  • Montana 30.2%
  • Oklahoma 27.9%
  • Michigan 26.1%
  • Maryland 21.5%

In addition to the type of accidents and your location affecting your rate increase, the carrier you use for your auto insurance makes a difference.

According to The Zebra, Allstate usually has the highest increase, whereas USAA is the lowest. It’s amazing the difference between one carrier and another. Here’s a snapshot of the average increases seen across the major carriers.

Carrier Average increase:

  • Allstate $1,129
  • Farmers $701
  • GEICO $721
  • Liberty Mutual $710
  • Nationwide $826
  • Progressive $1,168
  • State Farm $304
  • USAA $340

The length of time

Thankfully, your increased premiums don’t last forever. But you should plan on the increases sticking around for 3 to 5 years.

You can expect your penalty to last longer if it involves:

  • A DUI/DWI
  • Reckless driving
  • Serious bodily injury or fatality
  • Multiple accidents within a year

As you can see, it’s not as cut and dry when it comes to your premiums after an accident. There are several factors, from the dollar amount of the claim, to where you live, and which insurance carrier you use.

One thing is certain, you can take steps to help minimize the impact. But it’s going to take a little work.

The bottom line

If you have an at-fault accident, chances are your premium will increase by some amount. How much this amount depends on many factors. Fortunately, you still have plenty of options.

Whether it’s choosing an entirely new insurance carrier, scouring for discounts, taking a defensive driving course - or all of the above - you can gain control over your premiums after an accident. An accident doesn’t have to be the end of your lower premiums. Instead, it can be the beginning of a new policy with the right coverage at an affordable rate.

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This article originally appeared on JoyWallet.com and was syndicated by MediaFeed.org.

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