It seems to be a popular belief that, upon claiming the first damage / accident to your auto insurance company, a driver will experience an unavoidable hike in their insurance costs. Perhaps due to this urban legend, many drivers pay for their accidents / damages out of their own pockets, as many drivers hope to avoid the seemingly inevitable auto insurance increases after declaring their first claim. To find out if there is any truth to this rumor.
The Influence of Claims on Auto Insurance Costs
No Effect
To find out if a claim can raise your auto insurance costs, you must first evaluate your basic driving history. As auto insurance policy rates are determined by an assessment of a driver’s history, record of tickets, report of accidents, age, average miles driven per week / year, and other factors, simply submitting a single claim to your company will generally not raise your rates. For example, examine the following driver’s history to evaluate how their positive records help him / her to avoid a rise in insurance rates:
- 27 years old
- No accidents
- No speeding tickets
- Solid credit score of 700, proving the driver pays bills in a timely and responsible manner
- Commutes 20 miles to work 5 days a week (round trip)
With these positive driving history features, an insurance company will view this individual as safe, responsible, and reliable. As such, if this driver were to damage his / her car in an accident, most auto insurance companies will not punish him / her by raising the rates of their insurance policy.
Rate Increase
On the other hand, examine this alternative example of how a negative driving history could result in a hike in coverage costs:
- 27 years old
- 2 accidents
- 1 speeding ticket
- Weaker credit score of 620, with some lenders reporting late bill payments
- Commutes 20 miles to work 5 days a week (round trip)
While this driver’s age and commuting distance are the same as the first driver’s, this second driver has a less reliable driving and credit record. As a result, the second driver poses a greater cost risk for insurance providers. If this second driver were to submit a claim to cover damage to their vehicle, the driver’s poor history and additional claim may very well result in a raise in the cost for coverage.
