As if a car wreck wasn’t bad enough, filing an insurance claim is guaranteed to result in a premium spike. But what do those increases look like year over year? insuranceQuotes and Quadrant Information Services decided to find out.
For the fourth year in a row, the pair analyzed the average economic impact of filing various claims on an auto insurance policy.
“Using a hypothetical 45-year-old married female driver who is employed, has an excellent credit score, has no lapse in coverage and has filed no prior auto insurance claims, the study looked at how much annual premiums can go up, on average, after filing one of three different types of claims,” insuranceQuotes said. These included bodily injury, property damage and comprehensive.
(You read right: Your credit score can affect your auto insurance premium. You can view two of your scores free, updated every 14 days, on Credit.com.)
Beyond that, the study examined the effect of the claim’s amount while comparing the average premium increases for all 50 states and Washington, D.C.
Their findings: Just a single auto insurance claim of $2,000 can cause a premium to spike, on average, by 44.1%. Filing a second claim in the same year can cause an average annual premium to jump a whopping 99.4%.
There are plenty of reasons for this, safety equipment and the economy improving among them, but car owners should remain vigilant about driving safely — and keeping costs down. The cost of paying bodily injury claims has increased, and with newer cars on the road, insurers are adjusting their charges accordingly.
Remember, premium increases will vary by claim type and for accidents where you were at fault. With that in mind, let’s see what your auto insurance premium increases might look like after filing one $2,000 claim in the 20 worst states to do so.
Meteorologists and weather reporters often whip up a frenzy about major impending storms, and though many of these peter out with little impact, others leave devastating wreckage in their paths. When these storms are predicted, many folks want to prepare for the worst — power outages, evacuations and potentially sizable property damage. Folks fearing major damage to their vehicles might want to pile up extra coverage for them at the last minute, but insurance companies might not let them.
Why You Can’t Get Auto Insurance Coverage Before a Big Storm
Before a big storm, The Zebra’s resident insurance expert Neil Richardson explained, insurance companies put restrictions in place called “binding restrictions.” These prevent insurance agents from selling new insurance for vehicle damage (also called “full coverage”) in certain zip codes, or even whole states, if the probability of a damaging storm is high.
“This means that the company will not write any new policies that include comprehensive and/or collision coverage, nor will they allow existing customers to add comprehensive and/or collision to their policies during this restriction,” Richardson said.
Insurers place binding restrictions for new business ahead of predicted severe weather because the potential claims payout is far higher than the fees the insurance company would earn from those new policies.
“Let’s say that you buy a new policy that includes comprehensive and collision,” Richardson said. “You make one payment and then you file a weather claim that comes out to $5,000. The insurance company would lose a ton of money by taking you on as a customer before the storm, so it’s not worth the risk.”
Note: You will always be able to purchase your state’s minimum auto insurance requirements (in fact, you legally have to have at least the state minimum to drive), even while a storm warning is in effect. However, while the details differ state-to-state, minimum requirements cover only liability, property damage, and personal injury, and won’t cover damage to your vehicle (either in terms of repairs or replacement).
How Long Before a Storm Do These Restrictions Occur?
Each car insurance company’s actuary determines when the risk is large enough to turn down business and put restrictions in place, according to Richardson, so the pre-storm timeline will vary by insurer.
“The range is normally a few days before a storm hits a particular area. With a tropical storm or hurricane, there is no way to tell how far onto land the storm will travel, so the restrictions timeline often moves with the storm,” Richardson explained. Still, you might be turned down by one company but still find coverage elsewhere.
“There’s plenty of news coverage of potential looming storms, so if someone is concerned that there could be damaging severe weather, they’ll likely have time to add coverage to their policy,” Richardson said. “But waiting is the worst possible move, because if you wait too long, your company may have already placed a restriction on coverage until the storm has passed.”
Be aware that just because you carry comprehensive and collision doesn’t mean your insurer will always provide coverage for weather-related damage to your vehicle. If the damage is determined to be the result of an act of God, your policy will have to explicitly state that you’re covered for each scenario in order for you to receive an insurance payout. And if you’re in an area that causes you to be worried about flooding, ensure your policy covers that ahead of time, too.
Auto Insurance After the Storm
Do big storms have lasting impacts on insurance premiums?
“Large weather events absolutely affect rates, as evidenced by recent news coverage of many insurance companies raising their rates,” Richardson said. Insurance companies stay in business by determining each customer’s rate based on the total risk the company is assuming from all customers.
“Crashes, weather, vandalism, and theft claims are all risks that insurance companies consider to determine how much they will charge for insurance coverage,” Richardson said.
However, increased rates for customers in areas hit by severe weather aren’t likely to be immediate. After a storm in which many customers make insurance claims, the insurance company will determine what new rate they must charge to stay in business. Then, they must file rate updates with each state before they can charge customers more.