If you’ve ever gotten into
a fender bender, one of the first things that come to mind when you’re
assessing the damage to your car is how it’s going to affect your insurance
premium. Many people worry that filing a claim with their insurance company
will result in a rate hike – or worse – their insurer will give them the
heave-ho and cancel their policy altogether.
The truth of the matter is that practices differ within different
insurance companies, but there are some general rules regarding claims, rate
hikes and cancellations.
Depending on the
amount of the claim and whether the accident was your fault, your insurance premium
can be hiked up for a period of three years, essentially amortizing your claim.
If the damages were a result of your driving error, this is known in the
insurance biz as a ‘chargeable claim’. The general rule is that a percentage of
the claim above a certain amount is charged back to the driver via a premium
hike. While the 3-year period for the
rate hike is the general rule, again this depends on your insurance company.
As to the policy
cancellation issue, if you have a clean driving record and this is your first
‘chargeable claim’ (meaning that it’s your fault), it’s highly unlikely that
your insurer is going to cancel your policy.
If, on the other hand, you have a long history of citations and
accidents, your insurer is probably going to say “Adios, good luck and see ya’
later.” If your accident is a result of
DUI on your part, your insurer will probably cancel your policy quicker than
you can say “Designated driver” and you’ll have a very difficult time finding
someone else to cover you.
The bottom line for
all insurers in the amount of risk they’re taking in providing you with
coverage. Low risk equals lower rates,
more risk means they’re going to raise your rate, or worse, deny you coverage
altogether. Sure we all make mistakes
while driving, but if you want your premium to stay low, just make sure you
don’t make too many of them.