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To Claim or Not to Claim: Do Damage Claims Equal Rate Hikes?

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.