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Why do auto insurance rates rise after an accident?

Why do auto insurance rates rise after an accident?

After an accident, you are subject to an increase in the auto insurance premium, even if you did not cause the accident. How can this be possible?

The reasoning behind post-accident rate increases

We buy auto insurance to protect ourselves from the financial risks associated with being in an accident. When someone is in a collision, regardless of fault, an insurance company may view the driver as a higher risk. The rate of the increase will vary by insurance company.

Some states have regulations that prevent an insurance company from raising premiums if the insured is not at fault, or if a claim is filed under comprehensive coverage. Other states have laws governing surcharges and rate increases. Learn more about the regulations in your state by checking with your car insurance agent.

What to do if you are given a rate increase

After a rate increase, it is important to read your insurance policy to know the details. Contact your insurance agent to discuss options. It may be possible to keep your premium lower by increasing your deductibles, for example. And you can always shop for a new insurance company that will offer you better rates.

What if the accident involved serious injuries and significant vehicle damage?

In the situation where someone was seriously injured in a car collision, the most important thing to do is find an experienced injury lawyer who can manage the insurance claim, get the injured victim compensated for medical bills and property damage, and secure the funds needed to support the victim's financial future.

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Why do auto insurance rates rise after an accident?

Insurance companies are risk averse and in the business of making money. These are old companies in it for the long run. They have shareholders to consider, and have to pay out major claims if their covered drivers are found to be at-fault. If you file a claim, you likely have found that your premiums increased. You're not alone. Considering that the rates tend to stay high for about three years after each claim is filed, those rate hikes pretty much pay for the damages you’ve been paying your insurance premiums to cover. It’s almost like the car insurance company is giving you a loan to cover your accident losses that you pay them back for over the years. For more information on why car insurance premiums increase after a claim, click here.