Does Your Car Insurance Go Up If Someone Hits Your Car?
According to state law, all drivers in the U.S. must be covered by a minimum level of auto insurance while behind the wheel. Although legally mandated, auto insurance policies are sold by private auto insurance companies, which set rates based on a number of variables. In many cases, the premium goes up after a driver is involved in an accident.
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Rising Rates
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If a person is involved in an accident, even if the accident was not his fault, the rate he pays for insurance can rise. This is because insurance companies deem a driver with a history of being involved in accidents to be statistically more likely to file a claim against the insurance company. For example, a driver who lives in an area with a high rate of accidents is generally charged more than a driver who lives in an area with a low rate of accidents, even if the individual drives very safely.
Policy Price Setting
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Insurance companies price their premiums on a variety of factors. The cost of a policy will be affected by the amount of coverage the policy extends and the specific car and driver being covered. Policies with more extensive coverage are more expensive, while drivers whom the company deems a higher risk of getting in an accident are generally charged a higher price. For example, if a driver is young and has little driving experience, the company may choose to charge him more for the policy, as it believes him more likely to be involved in a crash.
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Effects
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When a driver's record changes, the company will alter its risk assessment of the driver and change the rates accordingly. After an accident, the company will, in most cases, deem the driver an increased risk of costing the insurance company money. To offset this increased risk, the insurance company may raise the driver's rates.
Considerations
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The size of the increase in the insurance policy depends on a variety of factors. If the policyholder was deemed at fault, he will almost certainly face a larger increase in the cost of his premiums than if the accident were not his fault, as a risky driver costs the company more than one who, for whatever reason, has a statistically higher risk of being involved in an accident. Also, the larger the payout that resulted from the accident, the more the insurance company may choose to raise the person's rates.
Misconceptions
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An insurance company will generally not raise the rates of the policyholder's current policy. Most auto insurance policies are issued for six months to a year. It is when the policy comes up for renewal that the company will choose to raise the premium. The driver is not required to to purchase a policy from his current company, but other insurance companies will likely be aware of the accident and adjust their rates accordingly.
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