Will My Insurance Be Cancelled After My Car Accident?
There are two questions most insureds ask their insurance agents or brokers immediately following a car accident.
The first is “is this going to be covered?” The second is “are they going to cancel my policy or raise my rates?” “Where the hell is my insurance money?” would probably be third. If that’s the first thing you want to know right after a crash, then let me tell you, that’s a little shady.
When it comes to the first question, that’s a more complicated question for your agent to answer than you may realize; it’s a matter for another time. Believe it or not, the response to the second question is fairly complex as well.
There is no direct answer that this website, or even your insurance agent, could give you. A variety of different factors come into play, and even with certain elements conspiring against you, that car crash still might not get your insurance cancelled. Here are a few things to consider after your accident:
Was I At Fault For The Car Accident?
If the answer is “no,” then this is certainly a better position in which to be. Hopefully, there were no injuries or serious damages done. Regardless, someone is going to have to make these repairs, and a bill will be footed.
Some states are “no-fault” states, meaning the insurance company will pay the claim without respect to who caused the accident. Most, however, do not have this enshrined in statute. The fact remains that if you didn’t cause the car accident, you won’t be on the hook for it.
It’s typical for insurance companies to take into account your at-fault accidents when deciding on whether to write or renew your policy. This is evaluated from a monetary standpoint as well as frequency. Some agents out there will tell you, and it may be true, that one moderately-sized claim over five years will hurt you less than five small claims, one a year. As far as the insurance company is concerned, if they’re taking a lot of little losses on you frequently, it’s only a matter of time before there’s a big one.
How Many Priors Have I Had?
Working off of the above, the more claims you have, the less likely your insurer will want to keep you. Insurance is not a charity: it’s a business. If you cost them more than you pay them, that will catch up with you.
How Big of a Claim Was It?
If we’re talking a four-digit number, that’s one thing. If this was a total loss with a big-number liability claim for bodily injury or property damage you caused, that could get very messy. It’s not unusual to see an insurance company pay a huge claim and then set the policy up for non-renewal the following year because of an “adverse loss ratio.” This is what we described above with the you-pay-less-than-they-pay-you thing. The more lopsided the ratio is against the insurance company, the more likely it is they will send you overboard.
Yet, this is not for certain. If you’re already in a residual or “high-risk” driver’s pool, your premium may increase but there’s nowhere else you can go. You’re already in the last-resort insurance market; can’t go any lower than the basement. Further, the insurance company may evaluate your unique situation and make a different determination.
If you have what some call “cut-rate car insurance,” where low premiums are often emphasized over coverage, a sizable loss will make your loss ratio worse than it might have been elsewhere. (And you get what you pay for.) Further, your coverage in the event of an accident might not do the job you hoped.
Other Underwriting Factors
An insurance carrier will take into account other factors aside from your claims history. For example, your payment history and your overall driving record may be taken into account when deciding whether or not to renew your policy. Each situation is taken separately, so just because your neighbor got non-renewed after his car accident doesn’t mean you will as well.