If auto insurance wasn’t already confusing for many consumers, every state jurisdiction has their own rules and regulations. This often…
According to Forbes.com, the average driver is involved in 3-4 accidents during their driving career. Depending on the type of accident, where you live, your insurance company and your driving history, you may pay higher rates regardless of who (or what) caused the accident. Most of us would be inclined to say, “What? Why should my rates increase if an accident isn’t my fault?”
This topic of insurance is complex with many factors that can influence potential surcharges (or policy level rate increases). Let’s look at some of the variables that may effect whether or not your rates may increase after filing a not-at-fault claim.
What type of claim is being made?
There are two broad categories under which all auto claims are made: liability or physical damage.
Physical damage (not to be confused with property damage which is a type of liability coverage) is the category that covers damage to YOUR car. Liability is the category that covers someone else’s property, injuries or even death when you, as the driver, are found to be negligent.
Under physical damage there are two types of coverage: collision and comprehensive.
- Collision coverage covers your vehicle for physical damage that occurs when your vehicle hits, or is hit by, another vehicle, or another object. Collision also covers upset (unintentionally rolling or flipping of your vehicle).
- Comprehensive coverage extends to physical damage other than collision. Examples of comprehensive coverage include: severe weather, fire, flood, theft, vandalism, glass damage, falling objects/missiles and birds/animals. Many not-at-fault claims fall under comprehensive coverage.
There are instances where your liability coverage will pay for accidents that are not your fault. One such instance is when no-fault (or Personal Injury Protection, often referred to as PIP) coverage is triggered. Personal liability will pay when someone else is at-fault is when Uninsured/Underinsured Motorist coverages are triggered, as well. We will discuss this in greater detail in the next section. The problem with a policyholder’s liability paying for an accident they are not responsible for, means that someone must pay for it somewhere along the line, which may result in a surcharge.
Where do you live?
While California and Oklahoma have been able to implement legislation that makes it illegal for insurance companies to surcharge you for accidents that are not your fault, two states do not require auto insurance, at all.
Fourteen states require underinsured motorist coverage (UIM): Connecticut, Maine, Maryland, Massachusetts, Minnesota, Nebraska, New Jersey, North Carolina, North Dakota, Oregon, South Dakota, Vermont, Virginia, and Wisconsin. UIM is a liability coverage designed to pay a policyholder when the at-fault driver’s limit of auto liability insurance does not cover the damages sustained in an accident.
Twenty-two states require uninsured motorist coverage (UM): Connecticut, District of Columbia, Illinois, Kansas, Maine, Maryland, Massachusetts, Minnesota, Missouri, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Oregon, South Carolina, South Dakota, Vermont, Virginia, West Virginia, and Wisconsin. UM is triggered when another driver who is at fault for the accident has no auto liability insurance or the policyholder has been bit by a hit-and-run driver.
Additionally, twelve states, plus the District of Columbia, require Personal Injury Protection (PIP) or no-fault coverage. PIP is designed to protect policyholders from delayed payout for personal injury claims, and to lower the number of lawsuits related to traffic accidents, regardless of who is at-fault.
As you can see, while liability insurance is designed to pay for at-fault accidents, there are many instances where your carrier may have to cover all or part of a loss you are not responsible for, depending on where you live.
What carrier are you insured with?
We have looked at the types of claims that are made and variables that arise depending upon where you live, but your insurance carrier may play a role in whether you are surcharged for a not-at-fault accident, as well.
The Consumer Federation of America (CFA) released a study in February of 2017 showing vast differences in how five different insurance companies handle not-at-fault claims. In the study, Progressive was shown to be the most aggressive in penalizing not-at-fault accidents on average by 16.6%, whereas, State Farm does not surcharge, at all, for such accidents. Geico and Farmers Insurance companies raised rates by 11-14% on average, while Allstate occasionally surcharged on average 4.9%.
So WHY is there so much variation from one company to the next? The answer to that question in simplest form is it is all dependent on how the company spreads their risk.
The same study by the CFA also revealed a correlation between socio-economic status and the rate at which their policyholders are surcharged for not-at-fault accidents. On average, high-income drivers were surcharged at an average rate of 3% less than those making a moderate income.
One might suggest this is biased, however, research shows that variables such as marital status, level of education, homeownership and credit/insurance scores are strong predictors of what kind of a risk the policyholder will be, just as one’s driving record and claim history paint a similar picture. In simplest terms, the more claims a company must pay, the more they must charge, and those costs are passed on to the group with the highest risk first, in the form of a surcharge.
As you can see there is no cut and dried answer to the question, “Can a not-at-fault insurance claim raise my rates?” As with all areas of insurance, it is important to visit with a licensed representative about your individual needs and circumstances, programs and incentives their company may offer and laws which govern the insurance industry in your state.
resource – https://www.forbes.com/sites/moneybuilder/2011/07/27/how-many-times-will-you-crash-your-car/#3631072d4e62