When I was teaching my daughters to drive, I gave them this fatherly advice:
Do not drive close to cars with major body damage. The guy behind the wheel is probably accident-prone, or so I figured.
Insurance companies think the same way. Do they ever.
Filing a claim after an accident can raise your rates 28 percent in Missouri and 29 percent in Illinois. So says an analysis by Quadrant Information Services commissioned by the online insurance shopping site InsuranceQuotes.com.
That’s something to consider the next time you back into a pole in a parking lot. You can drive around with an ugly fender, leaving the insurance company ignorant of your goof, or you can file a claim and suffer the consequences at renewal time.
I take the bent-fender option. My old Ford Dentmobile had a bumper sticker that read, “Don’t laugh. It’s paid for.”
Insurers are actually more merciful around here than elsewhere in the country. An accident in Massachusetts will raise your rates 67 percent. It’s 62 percent in California, 60 percent in New Jersey and 47 percent in North Carolina.
The study shed no light on why. Differences in state regulations probably play a role, says InsuranceQuotes senior analyst Laura Adams.
Or maybe insurance actuaries don’t like states with nice beaches. Nationally, drivers pay an extra 38 percent on average after a smackup.
The big premium increases come from collisions, not from hail storms, break-ins and other nastiness covered under the “comprehensive” portion of an insurance policy. “They have very little impact on rates,” says Adams.
Insurance companies differ fairly widely on how they treat accidents and how much they’ll raise your rates. The decision depends in part on whether the insurer decides you were at fault.
The percentage averages in the study were taken from insurance company filings with state insurance departments. They are based on a fictional 45-year-old married woman who has a job, an excellent credit score, no lapse in coverage and has filed no prior claims.
Consumers might consider such premium hikes the height of cheekiness. After all, you pay for insurance to cover possible losses. But once you file a claim, the company starts clawing its money back by charging you higher rates.
Then again, if the company was rating you as a safe driver, and you show you’re not one, maybe it makes sense to charge you more.
On average, accidents disappear from the calculation after three years.
“It is impossible to say how a single claim will affect your own insurance rate. We look at each claim based on its own merits,” Jim Camoriano, spokesman for State Farm Insurance (by far the largest auto insurer in the St. Louis area) wrote in an email. “Our emphasis is to help people lower their risk of property damage and injury when traveling on our state’s roads.”
So, you can’t really tell if a claim will raise your rates until after you’ve filed it.
Companies use lots other factors to set rates — traffic tickets, the auto theft rate in your ZIP code, the type of car you drive, your commute. People get zapped with higher premiums for being under age 25.
One of the most controversial factors involves the use of credit scores to set premiums. Another InsuranceQuote study found that someone with a middling credit score may pay 24 percent more for car insurance than a person with excellent credit. Someone with lousy credit will pay twice as much as a someone with very good credit.
Critics question why someone behind on his bills would be more likely to crash his car. But insurers insist there is a statistical connection. They use special scores tailored for insurance risk.
So, what’s a consumer to do about all this?
If you’re feeling clumsy, seek a policy with “accident forgiveness.” Insurers offer not to ding your premium for the first accident. Some charge extra for that indulgence. Before signing up, ask for details: Are all accidents forgiven, no matter how awful? Does the promise have an expiration date?
Before you file a claim, do a little calculation. Would it be cheaper to live with that dent — or fix it yourself — rather than risk a higher premium?
“You really shouldn’t file a claim unless it’s well in excess of your deductible,” says Michael Barry, spokesman for the Insurance Information Institute, an industry group.
InsuranceQuotes has an online calculator to help. For instance, a Missourian paying $800 yearly for coverage, with a $500 deductible, shouldn’t file a claim for property damage of under $1,214.
This also argues for higher deductibles — providing that you could pay the deductible if you had to. If you’re not going to put in for the small stuff, why pay extra to keep your deductible down?