How a Car Accident Can Impact Your Car Insurance Rate

A pair of drivers are looking at the damage to their cars after colliding with each other.

If you've been involved in a car accident, you may be assuming the worst about the effect it'll have on your auto insurance. But not every accident is equal, and in some cases, your premiums may not go up at all.

Here's what you need to know about how car insurance companies view accidents and how one might impact your car insurance rates.

It Matters Who's at Fault

The cost of your car insurance policy is determined by many things, including how risky a driver you are. If you're determined to be at fault in an accident, your insurer may choose to increase your policy premiums because your fault in the accident may be viewed as a sign of risky driving.

If you're not at fault for the accident, you may not see any increase to your rate at all. There's no guarantee, though. The at-fault party's insurance will likely cover your repair bill, but you still might see a rate increase. That's because the number of accidents you've been involved in increases your risk in the eyes of insurance companies, even if you weren't at fault.

The other driver's insurance coverage can also make a difference. If the driver who caused the accident doesn't have enough insurance coverage—or no coverage at all—you may need to tap your policy's uninsured/underinsured motorist coverage. If this happens, your insurance company may choose to increase your policy premium.

The Claim Amount Is Important

Whether or not you're at fault for the accident, any rate hike you experience will be partially based on the amount of the claim you file.

For example, if you hit another vehicle and cause significant property damage and bodily injuries, you may end up with a bigger rate hike than if you hit a tree and only need money to repair your vehicle.

Also, it's important to note that each insurance company calculates insurance rates differently, so a $10,000 claim with one insurer may result in a different increase than another, all else being equal.

Your Driving Record Also Comes Into Play

In addition to your most recent accident, insurance companies will also review your past driving habits. For example, you may be more likely to see a bigger increase in your rates if your most recent accident is the latest of several in the past few years.

Insurers may also review moving violations, such as speeding, reckless driving and other offenses, to determine your overall risk profile and adjust your premiums accordingly.

Finally, the circumstances surrounding your accident will be an important part of the assessment. For example, if you caused an accident while you were driving under the influence of alcohol or drugs, your insurer may increase your premiums even more, or even refuse to renew your policy once the current policy period ends.

What to Do if Your Car Insurance Rates Go Up After an Accident

If you've been in an accident and your insurance company increases your premiums as a result, the change won't take place until your policy renews. However, your rate can stay elevated for several years, depending on the situation.

As a result, it's a good idea to shop around once you know your new rate to find out if you can get a cheaper policy elsewhere.

Of course, other insurers will similarly review your driving record and claims history to calculate your rate quote. But again, each company evaluates these factors differently, and you may still be able to find a lower rate with a different insurer.

The best car insurance company for your situation can vary, depending on where you live and your situation. But take some time to review how coverage from at least three to five companies stacks up in your region, and be sure to compare rates and other features. Some of the top options include Geico, Liberty Mutual, State Farm and more.

How to Lower Your Rates Going Forward

Whether or not you find a better rate with a different insurance company, you'll likely continue to experience the consequences of increased premiums for at least a few years.

While you can't go back and change what's already happened, you can take other steps to try to reduce your car insurance rates. Here are some tips to help you get started:

  • Reduce your coverage. Check your policy to determine if you can safely reduce your coverage amounts. For example, if your vehicle is old, paid off and you have enough savings to replace it if you get in another accident, it may not make sense to keep your collision and comprehensive coverage. Alternatively, you may choose to increase your deductible, which is how much you pay when you file a claim before your coverage kicks in. Just keep in mind that reducing or dropping coverage that you need could cause a financial strain down the road if you file another claim.
  • Ask for discounts. Every auto insurer offers a long list of discounts to reward customers for, among other things, driving safe vehicles and practicing safe driving habits. You may also qualify for discounts based on the organizations you belong to. Call your insurer to see if there are any discounts that aren't currently being applied to your policy and see if you can qualify for them.
  • Maintain good driving habits. Even if you've made some missteps in the past, you can improve your chances of getting lower rates in the future by practicing good driving habits now. If you're trying to get your rates down, another accident (or more moving violations) will only work against you.
  • Improve your credit. While your credit isn't directly related to your driving habits, insurance companies in many states factor it into your rate calculation. Credit-based insurance scores use the information in your credit report to help insurance companies calculate how likely you are to file an insurance claim. If you can improve your credit score, it could help you as you shop around for a lower rate in the future.
  • Get coverage based on your usage. If you work from home or have a short commute, you may be able to get a less expensive policy that better fits your needs. As you shop around, ask about usage-based policies to see how they compare to what you're paying now.

Taking these steps can take some time, and you may not start seeing results immediately. But over time, they'll provide you with opportunities to save on car insurance, regardless of which insurance company you choose.

Improving Credit Can Provide Other Positive Results

Improving your credit can be an excellent way to reduce your car insurance rates, and it can also provide other positive results for your finances. For example, homeowners insurance companies may also use your credit history to help determine monthly premiums.

In addition, increasing your credit score improves your chances of scoring low interest rates and fees when you apply for loans and credit cards.

Experian's free credit monitoring tool can make it easier to improve your credit by providing you with free access to your FICO® Score and your Experian credit report. With this information, you'll be able to view the areas of your credit history that need some work, and you can keep track of your progress.

Building credit can take time, but the efforts could save you hundreds or even thousands of dollars.