Types of Coverage
There are various types of coverage that may be involved when an insurance company pays a claim. Whether or not an accident is your fault, your insurance company may have to pay. Basic types of auto insurance coverage include collision, medical payments, uninsured and underinsured motorist coverage, personal injury protection, bodily injury liability and property damage liability. These types of coverage offer protection if you as the driver, any passengers in your vehicle or anyone in the other vehicle involved in the accident are injured. They also provide coverage for damages to your vehicle and someone else's property.
In cases where a motor vehicle accident is determined to be your fault, your insurance company may charge points to your policy at the time of renewal. You may continue to be charged points for up to seven years following an accident, costing you more money for auto insurance. How points are assessed vary from state to state, but in some states points are added to your driving record if a traffic accident is your fault. If you receive points related to an auto accident, your insurance premium can increase by as much as 30 percent depending on how serious the accident. Drivers who are involved in accidents are considered to be a bad risk because they cost insurance companies money.
Drivers who have not been involved in any automobile accidents and who have a good driving record get better insurance rates because they are considered to be less of a risk. The more accidents in which you are involved, insurance companies will consider you to be a poor risk and will charge you much higher premium rates.
Many different factors are involved in whether an insurance company raises your premium rates after you file a claim. The Insurance Services Office recommends a standard that increases a driver's insurance premium by 20 percent to 40 percent of the insurance company's base rate following a first accident that is your fault. However, most companies use their own discretion when it comes to whether they will raise your rate after only one accident. An insurance company's base rate is calculated by averaging the amount of claims the company pays in addition to the claims processing fee.
Your driving record is one of the primary factors affecting your auto insurance premium. Although auto insurance companies differ in how far back they go when looking at a person's driving record to find traffic violations or accidents, any accident claims you make are bound to affect your premium, sometimes even if an accident is not your fault. Some companies go back only three years. Other companies take a look at the previous five years, while some go back as many as seven years. Most companies look at the driving records of any drivers covered by the policy.
A good driving record can keep your insurance rates lower. Some auto insurance companies will not raise your premium after a first accident if you've had a clean driving record before that. Having made no previous claims on your insurance can work to your advantage. Even drivers who have had accidents on their record can have premiums reduced once they maintain a safe driving record for several years. Companies that offer accident forgiveness to drivers remove old accidents from your driving record.