Does an At-Fault Accident Affect Your Insurance?
Accidents happen. But for car insurance, the fault rating of the accident has a direct impact on your rates at the time of your policy renewal. The question remains—by how much? Let’s discuss what causes these changes in auto insurance, the reasons why we see it happen, and how drivers can mitigate the increase.
What Is an At-Fault Accident?
In Canada, many provinces operate on a no-fault insurance system. This means that although fault will be determined, it has no bearing on which insurance company drivers collect compensation from. Everyone involved in an accident files a claim to their own insurance policy.
At-fault accidents often arise from a collision between your car and another, or another piece of property. Whether you miss a road sign or collide in a parking lot, by definition, accidents are never intentional. But unintentional doesn’t mean “not responsible.” And in some circumstances, an at-fault collision can result in higher insurance premiums.
How Long Does an At-Fault Accident Affect Premium?
In Canada, many provinces operate on a no-fault insurance system. This means that although fault will be determined, it has no bearing on which insurance company drivers collect compensation from. Everyone involved in an accident files a claim to their own insurance policy.
Every driver can have a bad day on the road. Whether you miss a road sign or collide with a guard rail, by definition, accidents are never intentional. But unintentional doesn’t mean “not responsible.” And in some circumstances, an at-fault collision can result in higher insurance premiums.
Related: All About High-Risk Car Insurance
How Can You Pay Less After An At-Fault Accident?
Insurance companies don’t raise rates to punish risky drivers. Instead, they adjust your rates after an accident to reflect the new data collected by getting into a collision. There are ways to mitigate the increase on your insurance, like accident-forgiveness coverage some insurance companies offer. Others include:
- Shopping around: While staying with your insurance company for a long period of time builds a loyal relationship, doing a routine shop-around to compare your rates to those of others available, especially after an accident, is a good measuring tool. A broker like AA Munro can help you shop.
- Raising your deductible: This causes a greater out-of-pocket cost to repair your own car in a future accident—but the higher the deductible you choose, the lower your yearly premium.
- Adding discounts: You might be eligible for a discount based on your education or occupation. Checking with your broker on a regular basis is important in making sure you benefit from any and all discounts available to you.
- Improve your credit: While this is considered a long-term strategy, a healthy credit rating will help mitigate rate increases over the years and result in more affordable car insurance for you.
What Else Affects Your Insurance Rate?
Insurance companies use a pool of premiums to pay for the claims that occur. Your insurance company estimates an annual cost to accept the risk of covering your assets, which is based on a combination of unique lifestyle factors and the need to balance claim payouts. Furthermore, rates can go up or down year over year.
While its definitely true that insurance is there to help us in times of financial stress, it’s impossible to ignore the fluctuation in rates that come as a result. Insurance rates are regulated by a few things, like geographical location or loss experience. Another main driver here is how much money each insurance company figures they need to pay out in claims—the reason we have insurance in the first place!