How Long Does an Accident Affect Car Insurance Rates?

10 minute read Published on Jan 17, 2020 by BrokerLink Communications

How Long Does an Accident Affect Car Insurance Rates?

In addition to immediate damage to your vehicle, potential injuries, or property damage, car accidents can also have financial impacts. They’ll sometimes increase car insurance premiums, and the increase may last several years. The amount will depend on several factors, including your insurance provider and whether you’re at fault or not.

While practicing safe driving habits is a great way to avoid insurance claims (and other) issues, drivers involved in accidents should know the impacts to their auto insurance premiums, and what they may do to mitigate the effects.

Learn how your car insurance rates may be affected by an accident, and what you can do about it.

How do car accidents affect insurance rates?

A car accident may result in a car insurance rate increase when your policy renews. As with many other aspects of an auto insurance policy in Canada, however, exactly how your insurance is affected depends on a variety of factors, including:

  • Who is at fault in the accident
  • Your past driving record
  • The cost of the accident claim

If you’re not at fault, your car insurance rates may remain unchanged. If you are at fault, the premiums might not rise significantly, if you haven’t filed an insurance claim recently and the amount of this claim is relatively minimal. Note: if you have Accident Forgiveness coverage, your premiums will not increase as a result of the accident per the terms and conditions.

If your premiums increase, the increase usually doesn’t go into effect until your policy renews (or you change policies).

If you are involved in multiple accidents within three years, your premium increases can add up which makes your insurance more expensive.

In summary, after an accident the following may happen:

  • Your car insurance rates may remain relatively the same if:
    • You have accident forgiveness coverage.
    • You are not at fault.
    • You have a clean driving record with no traffic violations.
    • The accident is minor.
  • Your insurance rates could increase if you are at fault, based on how your insurer evaluates the situation.
  • Any increase will be effective at your next policy renewal. Depending on the company, it could last up to nine years.

What is no-fault insurance?

No-fault insurance is a structure designed to make car insurance more affordable, and claims processing easier after an accident. With no-fault car insurance coverage, fault has no impact on the amount insured drivers collect after an accident. Each driver files a claim and collects insurance from their own car insurance providers as long as the accident is covered.

If you have no-fault insurance and you are in an accident, you simply file a claim with your insurance company and they will pay the claim according to your policy. You will have to pay any applicable deductible if you’re at fault, but your insurer will cover the remaining damage to your vehicle and any injury-related costs stipulated by your policy. Your insurer doesn’t have to pay anything to repair the other drivers’ vehicles or compensate injuries.

Keeping the claim between you and your insurance company through the no-fault system simplifies claims processing and reduces the likelihood of a lengthy lawsuit. This ensures you get compensated faster and it keeps premiums lower because insurers don’t have to spend as much on administration and legal fees.

What’s the difference between no-fault insurance and a no-fault accident?

No-fault insurance is often confused with no-fault accident. Just because you carry no-fault insurance doesn’t mean your insurance provider won’t make a fault determination in the claim and adjust your rates accordingly in the future. Even with no-fault insurance, your car insurance rates can increase after an accident. Most provinces in Canada, including Alberta, British Columbia, New Brunswick, Nova Scotia, Prince Edward Island, and Quebec, have some form of a no-fault insurance system in place. The exact nuances of each system varies.

No-fault insurance is a system designed to simplify insurance claims and can be summarized as follows:

  • You deal with your insurance carrier if you have an accident claim.
  • Your insurance carrier provides compensation according to your policy’s comprehensive coverages.
  • You may still be found at fault for an accident.
  • Your insurance rates may still increase after an accident.

Car insurance and driving record changes

Premiums for car insurance in Canada are based partly on your driving record, and any change to your driving record could impact your car insurance rates.

Car insurance companies usually don’t have access to your complete driving history but they can (and do) pull a driving record (abstract) that shows any recent driving history events. Your driving record generally goes back three years, and can show tickets, accidents, claims, convictions, and completed driver’s education courses. Whenever any of these events goes on your driving record - , including an auto accident – they can affect your car insurance rates.

There is one thing you can do to help reduce your premium if it’s impacted by an accident, and that is to complete an approved driving course. In many situations, an approved driving course can result in a premium reduction.

To summarize:

  • A driving record (also called an abstract) normally shows three years of driving-related incidents like speeding tickets or moving violations.
  • Incidents may result in a premium increase.
  • You may be able to reduce your premium by completing an approved driving course.

How claims may impact car insurance rates

It is recommended that you call your insurance company or broker in the event of a car accident, even if it’s minor. Your broker and insurance company will help you follow the process that takes place after an accident occurs. Here are a few reasons why calling your insurance company, can benefit you:

Damage and injuries are not always seen immediately

If you’re involved in a fender bender, you may think you are looking at a few hundred dollars to replace a bumper. However, once you get it into the shop, you learn that because of the make and model of your car, it will cost closer to a few thousand! Also, injuries may not be apparent until days or weeks after the accident. If you haven’t reported the incident and there is no police report to back it up, the other driver involved could claim the collision never happened.

Your insurance company can help you with the repairs

It can take awhile for insurance companies to settle. By reporting an accident with another vehicle to your insurance company (even if it was not your fault), your coverage will allow you to seek immediate repairs to your vehicle rather than waiting until the dispute is settled. In addition, your insurance company and advisor will advocate for a fair claims settlement.

The other party may not have proper insurance

If another party is involved and that driver doesn’t have car insurance – and you haven’t reported an accident to your insurance company in a timely manner – you could be on the hook for covering all expenses on your own. If you report the incident to your insurance company in a timely manner, you could be compensated through underinsured coverage.

Calling your insurance company is different from filing a claim

There is a difference between calling your insurance company to report an accident and filing a claim. By reporting the accident, you will be covered if the damage or injuries are significant. For example: imagine you have an accident and it appears there are no injuries - just a ‘ding’ to your rear bumper.

A few days later, whiplash symptoms develop and you need to visit the doctor. You later learn that the ‘ding’ took out an important sensor that’s part of the driver-assist technology. You could go from expecting to pay a few hundred dollars to paying expenses more than double that amount.

In addition, if another party involved files a claim with their insurance company and you don’t, your insurance company will still be notified and the claim will be opened anyway. It’s best to be honest even if the damage is minor and you don’t need to file a claim.

Tips to avoid a car accident raising your insurance rates

If you’re worried about your insurance premium increasing after a car accident, you’ve come to the right place. It’s true that some incidents, like DUIs or at-fault accidents can increase the cost of car insurance. But there are a few ways you can avoid a raised insurance premium, or at least mitigate how much insurance rates increase after an accident. Follow the three tips below to avoid a raised premium after a car accident:

Enrol in an approved driving program

To reduce your insurance premium if it is raised after an accident, we recommend enrolling in an approved driving course. In many cases, an insurance provider will give you a discount on your car insurance policy or lower your premium if you can show proof that you attended driving school.

While most drivers associate driving school with young or new drivers, this isn’t always the case. Anyone of any age can attend a driving program, and it might be a smart decision for someone who recently got into an accident. Receiving instruction from a professional shows the insurance company that you are taking responsibility for your mistakes and are doing everything in your power to avoid another accident. They may take this into account and lower your premium as a result.

Add accident forgiveness coverage to your car insurance policy

One of the most effective methods of avoiding higher insurance rates after an accident is accident forgiveness coverage. If you add accident forgiveness coverage to your policy, the insurance company is not allowed to raise your premium after your first at-fault accident, per the terms and conditions of the policy.

Accident forgiveness is additional coverage that can be added to your car insurance policy as an endorsement. It can both protect your driving record and prevent your insurance premium from increasing if you have an at-fault accident claim. Please note that coverage varies by province.

Do not admit fault at the scene of the accident

Our final tip to avoid a car accident raising your rates is to not admit fault at the scene. Generally speaking, you never want to admit fault to any other drivers or passengers involved in the accident.

Determining fault is a complicated process, and admitting fault prematurely, especially if you aren’t certain who was at fault, could be detrimental in the long run. Plus, accidents only tend to impact insurance premiums if they were the fault of the driver, so if you admit fault but the accident wasn’t your fault, this couldn’t unnecessarily raise your rates.

After an accident, adrenaline and emotions run high, which is why it’s best not to admit anything until you’ve had a chance to calm down and clear your head. After all, it can take time to realize who was responsible for an accident. It’s not always clear right away, even to those involved.

Many factors are used to calculate fault determination. The drivers involved, where they were driving, the road conditions, and the speed at which each party was driving will all be considered. Fault determination rules vary but are useful tools for both insurance companies and the police. Such rules not only determine which party is ultimately at-fault but also how much they were at fault (i.e. how much fault each party shares).

When determining fault after an accident, your insurance company will use the Fault Determination Rules that are published in Ontario’s Insurance Act. According to the Financial Services Commission of Ontario, after a policyholder reports a car accident, it is up to the insurance provider to investigate the circumstances of the accident and then make a decision based on the province of Ontario’s accident fault determination rules.

Get a car insurance quote from BrokerLink

If you’re involved in an accident, it can be very overwhelming. That’s where BrokerLink comes in. Our brokers are insurance experts and they’re here to help you navigate the claims process.

When it comes to getting an insurance policy that’s right for you, your BrokerLink advisor will take the time to get to know you and understand your needs.

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FAQs on Car Accidents and Car Insurance Claims

How long do insurance rates stay high after an accident?

This depends on where you live and how far back your insurance company checks. If you’re at fault, an accident can impact your insurance rates anywhere from three to ten years.

Does a car accident affect your driving record?

A car accident is one of the items that goes on your driving record (or abstract). Other details on the record include tickets, convictions, and completed driving courses that have occurred recently.

How an accident listed on your driving record impacts your car insurance rates depends on the insurance company and the specifics of the accident. An accident may cause rates to go up, but there are cases where an accident has no meaningful effect on premiums.

Will my insurance premium increase after an accident that wasn't my fault?

No, your insurance premium won’t increase if the accident you’re involved in wasn’t your fault, however, your insurance premium may increase at renewal as a result of normal market factors that are unrelated to your accident.

For more FAQs, visit the BrokerLink FAQs page.