Written by Lisa Keslar of Keslar Insurance in Newmarket, NH
We all know that accidents happen, and even a minor fender bender can cause headaches. But did you know that a seemingly insignificant crash can also affect your auto insurance premiums when it’s time to renew? In this blog post, we’ll break down why a single fender bender can lead to a significant increase in your insurance costs. Understanding these factors will help you navigate the insurance landscape more effectively.
Increased Risk Assessment: Insurance companies assess risk to determine your premiums. Once you’ve been involved in a fender bender, regardless of fault, insurers see you as a higher-risk driver. Studies show that people who have been in accidents are more likely to have future accidents. Consequently, the insurance company may increase your premiums to reflect the added risk of insuring you.
Impact on Loss History: Your insurance provider keeps track of all claims and accidents you’ve been involved in. When you report a fender bender, it becomes part of your loss history. Insurance companies use this data to evaluate your overall risk profile. Even one accident can negatively affect your loss history, potentially resulting in higher premiums during renewal.
Claims and Payouts: When you file a claim for a fender bender, your insurance company may need to cover repair costs or property damages. Insurers rely on data to predict the likelihood and expense of future claims. Since fender benders contribute to these claim expenses, insurance companies may adjust premiums to account for the potential cost of future claims associated with drivers who have a history of accidents.
Goodbye, No-Claim Bonuses: Many insurance policies offer no-claim bonuses as a reward for safe driving. These bonuses can lead to significant premium discounts over time. Unfortunately, if you’re involved in a fender bender and need to file a claim, you may lose your hard-earned no-claim bonus. Losing this discount can cause your premiums to rise during renewal.
Policy Reassessment: During the auto insurance renewal process, your insurer will reevaluate your risk and reassess your policy. They’ll review your driving record, claims history, and other factors. If you’ve recently had a fender bender, this reassessment may result in your being categorized as a higher-risk driver, prompting the insurer to adjust your premium accordingly.
State Regulations: Auto insurance premiums can also be influenced by state regulations. Some states allow insurers to consider not-at-fault accidents when calculating premiums. This means that even if you weren’t responsible for the fender bender, your premiums may still increase due to the overall risk associated with any accident involvement. (We believe, as of the time of publication of this article, that New Hampshire, Maine, and Massachusetts are all states that allow insurers to do so.)
Conclusion
A seemingly minor fender bender can have a significant impact on your auto insurance premiums. Insurance companies take into account the increased risk, loss history, potential future claims, no-claim bonuses, and state regulations when determining premiums. It’s important to drive safely and consider the potential long-term effects on your insurance rates when deciding whether to file a claim for a minor fender bender. Building a clean driving record and practicing safe driving habits can help mitigate the long-term impact on your auto insurance premiums.
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Disclaimer:
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status or investment horizon. The views expressed in this commentary are subject to change based on market and other conditions. These documents may contain certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
Milestone Financial Planning, LLC (“Milestone”) is a fee-only financial planning firm and registered investment advisor headquartered in Bedford, NH. Registration does not imply a certain level of skill or training. Milestone works with clients on an ongoing, long-term basis, providing financial planning, tax planning, retirement planning, and investment management services. Fees are based on assets under management and may include a financial planning fee. Milestone receives no commissions or referral fees and, as a fiduciary, is required to act in clients’ best interests. Advisory services are offered only where Milestone and its representatives are properly licensed or exempt from licensure. More information, including fees and principal risks, is available in Milestone’s Form ADV Part 2A. For help with your investments or financial planning, contact one of our fee-only advisors.
