How a Car Accident Affects Insurance Premiums
To understand the situation around insurance premiums, and how and why a car accident affect insurance premiums, one first has to understand the underlying principles upon which insurance is based.
Vehicle insurance companies collect small amounts, called premiums, from a large group of people on a monthly or yearly basis.
In return they promise to pay out a certain amount of money to an individual policy holder if he/she is involved in an accident.
This amount will normally cover the cost of repairs to his vehicle, and sometimes to other vehicles involved in the accident.
They make a profit if the total number of claims in a specific year is less than the amount they paid out as a result of accidents.
It is therefore in their interest not to accept clients who have a high accident risk, like people under 25 years of age, or very old people.
When you sign up for a policy, they will initially give you a certain risk rating, and based on that rating they will determine the amount of your monthly or yearly premiums.
Should anything happen after that date that increases your risk rating, e.
G you become deaf, they have to adjust your risk rating and therefore adjust your premiums accordingly.
When you are therefore involved in a car accident, the insurance company will assess the situation around your premiums again.
If they come to the conclusion that you are a higher accident risk than they initially thought you were, they will increase your premiums to bring it in line with your new risk rating.
You might therefore decide not to report minor accidents to your insurance company, but they might find out by studying the police accident reports.
Then they will increase the premiums anyway! From this it is clear how an accident affect insurance premiums, and why its in your interest in more ways than one to be a safe driver and not get involved in one in the first place.
Vehicle insurance companies collect small amounts, called premiums, from a large group of people on a monthly or yearly basis.
In return they promise to pay out a certain amount of money to an individual policy holder if he/she is involved in an accident.
This amount will normally cover the cost of repairs to his vehicle, and sometimes to other vehicles involved in the accident.
They make a profit if the total number of claims in a specific year is less than the amount they paid out as a result of accidents.
It is therefore in their interest not to accept clients who have a high accident risk, like people under 25 years of age, or very old people.
When you sign up for a policy, they will initially give you a certain risk rating, and based on that rating they will determine the amount of your monthly or yearly premiums.
Should anything happen after that date that increases your risk rating, e.
G you become deaf, they have to adjust your risk rating and therefore adjust your premiums accordingly.
When you are therefore involved in a car accident, the insurance company will assess the situation around your premiums again.
If they come to the conclusion that you are a higher accident risk than they initially thought you were, they will increase your premiums to bring it in line with your new risk rating.
You might therefore decide not to report minor accidents to your insurance company, but they might find out by studying the police accident reports.
Then they will increase the premiums anyway! From this it is clear how an accident affect insurance premiums, and why its in your interest in more ways than one to be a safe driver and not get involved in one in the first place.