If you enjoyed our last installment of the best GEICO commercials you should enjoy these gems just as much, if not more!
Can a Not-At-Fault Accident Raise my Rates?
🎙️ Enjoy our PODCAST on this topic
* podcast transcript
MAX
Ever gotten sideswiped? Not literally but by like bad luck? Like you’re in a car accident, but it wasn’t even your fault.
EVA
Happens all the time unfortunately. And you’d think, hey, not my bad, insurance will sort it, right? Right.
MAX
That’s what it’s for, isn’t it?
EVA
Well, today’s deep dive we’re looking at some info from. Let me see here. Yeah, Cheap Full Coverage Auto Insurance might make you double check that policy though, just saying.
MAX
Oh, that’s never reassuring to hear. So what are we getting into?
EVA
This whole thing about car accidents, it’s trickier than people think. Lots of folks don’t even consider this stuff until their rates go up.
MAX
Speaking of which, is that even legal? If it’s not your fault, can they still raise your rates?
EVA
OK, so car accidents, they’re way more common than we realize.
MAX
Yeah, the article mentioned something wild, like the average driver has three or four in their lifetime.
EVA
Exactly. So even if you’re like super careful, odds are you’ll have a Fender Bender or two just statistically speaking.
MAX
OK, so accidents happen, but that doesn’t mean my insurance should shoot up if I’m not at fault, right?
EVA
Well, that’s where it gets tricky. Lots of people assume not my fault, my rates stay put. But many of these accidents, they end up under comprehensive coverage.
MAX
Comprehensive. That’s for like theft, vandalism, that kind of thing, right? Not someone rear ending me at a red light You.
EVA
Got it. And here’s the catch, even though it’s not designed for at fault stuff, using it can still mean higher premiums.
MAX
Hold on. So if I get hit, even if it’s clearly not my bad yeah, my rates might still go up because of how they categorize it. It’s.
EVA
Counterintuitive, right? But yeah, that can happen. And it’s not even the whole story. Your location plays a huge role too.
MAX
Oh, right, the article mentioned something about California and Oklahoma.
EVA
Right. Those two states, they actually outlawed surcharges for not at fault accidents. Lucky ducks, right?
MAX
So living in the right place can save you a headache. What about everywhere else?
EVA
Everywhere else it’s a mixed bag. Each state’s got its own rules, different types of coverage they require, uninsured motorist, no fault policies. It gets complicated fast. It’s real patchwork honestly makes things confusing if you’re moving states or anything, but even within the same state the company you pick makes a huge difference for this not at fault thing.
MAX
Right, because it’s not like we can just skip insurance altogether, tempting as that sounds sometimes.
EVA
Tell me about it. So how do you know who to go with? Research is your friend here. The article mentioned this study, the Consumer Federation of America. They looked into how companies handle exactly this.
MAX
OK, Consumer Federation, that sounds promising, what they find?
EVA
Some eye opening stuff let me tell you. Huge variation between insurance like progressive. They were the most aggressive. Average surcharge of 16.6% for not at fault accidents. Well.
MAX
Hold up, 16% that’s that’s more than a 10th just because someone else messed up. Yep.
EVA
Not exactly fair is it? Shows you it’s not just about getting that initial cheap quote. Got to dig deeper.
MAX
For sure. So if there’s a bad example, what’s on the other end? Someone doing it better?
EVA
Yeah. So State Farm in this study at least, they didn’t add any surcharge at all 0 which just goes to show the company you pick really matters for this specific situation.
MAX
OK, that makes shopping around even more stressful, knowing it’s not just the price tag. But how do they even decide these surcharges? It’s not like a secret formula, right?
EVA
You’d think so, wouldn’t you? But basically insurance boils down to risk. They use tons of data trying to predict who will cost them money later.
MAX
So it’s not just about my driving record then?
EVA
Bingo. The article mentions things like get this, income, education, even credit scores, all that factors in wait.
MAX
Seriously. So someone who’s say, lower income, even with a perfect driving record, they might get hit harder just because of their finances.
EVA
That’s exactly what the study kind of hinted at, yeah.
MAX
Tough reality.
EVA
Man, that’s a lot to unpack. I get it, Insurance companies, their businesses got to manage risk, all that, but still feels kind of out of your control, you know, totally get where you’re coming from. Definitely raises questions about like, fairness, right? Equal access to insurance regardless of, well, all these factors. But ethics aside for a SEC, the take away for our listeners is clear.
MAX
100% knowledge is power, especially here. Like don’t assume just because you’re a good driver or live in a certain state that you’re automatically in the clear.
EVA
Right the article they stressed talking to your agent directly. Ask him about they’re not at fault policies specifically and don’t be shy about getting into the nitty be gritty how different things affect your rates. It’s like.
MAX
Hope for the best, prepare for the worst, right? Except here, preparing means knowing your insurance inside and out, no surprises down the line.
EVA
Exactly because at the end of the day, the more you know how they assess risks, set those rates, the better you can navigate the system, maybe even find ways to like lower your own risk in their eyes.
MAX
So drivers out there, here’s the deal. Don’t wait till you’re in an accident to think about this stuff. Do your homework, shop around and ask your insurer the tough questions. Don’t be afraid to might be surprised what you find out.
EVA
And hey, who knows, maybe all this talk about car insurance, the complexity of it, maybe it sparks a bigger conversation about transparency, about fairness in the industry. Worth thinking about, right?
MAX
Absolutely is. And on that note, that wraps up our deep dive for today. Hoe this eisode gave you a fresh perspective on car insurance hels you be a more informed driver out there. Until next time, drive safe and stay curious, folks.
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
