When a relatively safe driver has an accident without human injury, the first thought after the accident will often be to wonder what will happen to the cost of car insurance. Some drivers even consider not using insurance funds to pay for the repairs to avoid a hit on the insurance premiums. Because of police reports, this tactic does not guarantee that the insurance company will not discover the accident and raise the premiums anyway. Although car owners do have the option of consulting a car accident lawyer in such cases. The lawyer can help you in reducing the premium of your insurance policy as they have experience in this field.
To understand how an accident affects premiums, you must first know how insurance works.
Insurance is a way to decrease individual financial risk. By ensuring large numbers of people against the same potential problem, insurance companies rely on the fact that not everyone will have a claim during a given time period. In fact, they expect the percentage of people making a claim to be very low compared to the number of people insured. This way, the insurance company can make a profit by collecting small amounts of money from many customers and paying out larger amounts as claims to a few. The difference can be invested for income or collected as a profit.
If too many people have claimed at the same time, the insurance company can lose money or go out of business.
Insurance providers have two primary tactics to make sure that they can pay all of their claims and still turn a profit for investors. The first practice is to refuse insurance to drivers who are considered high risk. Many major companies will not insure bad drivers. The second way that the insurance companies maintain their profits is by charging higher premiums to drivers with a less-than-perfect driving record or who fall into an aging ranger considered to be a higher risk.
Insurance companies recover their losses or claims by charging higher premiums.
While some companies will offer to ignore a single accident within a 3 or 5 year period, not all do. Even if the first accident is waived, a second accident will spike your premiums. Often, the increase in premium costs will be higher than the amount of the paid claim over a 4 or 5 year period. For accidents with only $1,000 or $2,000 worth of damage, the driver is frequently better off to pay for the damage rather than file a claim. Insurance companies do not approve of this practice, but it does work most of the time to save money over the next few years.
If there are too many claims, everyone will get a rate increase.
While insurers do not usually raise rates for comprehensive claims or single accidents, the overall rates will increase if the losses are too great. Major storms can cause rates to rise. If you live in an area where car accidents and theft are higher, the premiums will go up. It is not just your accident that can raise your rates. How everyone else drives has an impact, too.
