U.S. News and World Report stated an average increase in car insurance rates of $665 per year after an accident. Bankrate reported that in Kansas, the increase after an at-fault accident is about 40%. The Zebra noted in Missouri, the increase is usually about $530.
While location can influence just how much a car crash raises insurance rates, the bottom line is they will go up. But why does this happen? There are two reasons why companies justify raising insurance costs for individuals who have an accident.
Increased risk
Insurance companies determine the level of risk a driver poses based on several factors, including their driving history. A history of accidents signals an increased likelihood of filing claims in the future, which translates to higher risk and the likelihood that the driver will have an accident again in the future.
Insurance companies also consider whether the driver was at fault or not. They view drivers responsible for accidents as a higher risk and adjust their rates accordingly. On the other hand, drivers not at fault may not see an increase or see only a small one due to a lower risk level.
Loss of money
Minor accidents with minimal damage may result in a moderate rate increase, while major collisions causing substantial damage and injuries can trigger more significant premium hikes. Insurance companies assess the financial impact of claim payouts to determine the extent of the rate adjustment. The goal for an insurer is to make money by collecting more money than they pay out, so if it has to recoup what it lost on an accident by charging individuals more.
It is important to note that a single accident can lead to lasting effects on insurance rates. One accident may jump rates for years before insurers no longer consider it.
