How Come My Insurance Went Up After No-Fault Accident?

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You’re involved in an accident and are told by your claims adjuster that you are not at-fault and you jump up and down singing “Glory Hallelujah” that is until you receive your annual renewal and notice your insurance went up. You feel your neck tighten, your blood pressure increase, you’re rearing to yell at somebody, maybe even hurt someone. However you need to relax, take a deep breath, maybe even take a chill pill because you are likely attributing this rate increase to your not at-fault accident. I’m here to tell you, depending on which state you live in, this is likely not the case. Your car insurance went up for a totally different reason and here’s why.

A Pool of Risk

The more likely reason your car insurance went up on renewal has nothing to do with you (i.e. your not at-fault accident), but more to do with the fact that your insurance companies costs went up this year. You see insurance companies operate like a mutual in the sense that the “risk” is shared by their customers. To put it simply, if you are with an insurance company that happens to have more than their fair share of “bad drivers” then you are screwed. Bad drivers get into a ton of accidents which costs the insurance company more money, even though you have been accident free you will still share in some of the burden of paying for their mistakes (hello higher insurance premiums!). Your premiums won’t go up anywhere as much as those that have at-fault accidents, but it will still go up if you are with an insurer that is essentially doing poor underwriting or just having a bad year (hurricanes ate all the cars).

The sharks are the bad drivers.
The sharks are the bad drivers.

Get Out of the Pool

Now you may be saying “Why should I pay for other drivers?”, though I am sure you are shouting it. To put it short, because they pay for you. If you are ever involved in an accident, the insurer goes to their pool of funds to pay for your claim. Think about it, if you are with your insurer for say five years and your annual premium is $985, after five years you have only paid $4,925. Even if they slightly increase rates every year, say you end up paying $6,000 for the five years. If you are involved in a total loss accident where your $30,000 vehicle is deemed a write-off, where do you think the insurance company gets the money to reimburse you for your car? To pay for your $100,000 medical expenses? Not from you, since in the five years you’ve been with them you’ve given spent a measly $6,000. Remember the insurance company has overhead costs as well: employees, office buildings, donuts and marketing all eat into the pool as well.

What Should I Do?

If you notice your insurance company is continually raising your rates without cause, meaning you have no at-fault accidents or tickets than you absolutely should compare rates from other insurers to make sure you are not paying too much. You may also want to call your insurance company to ask them, “hey why have my rates been going up when I have no accidents or tickets?”. If you’re talking to a customer service rep that knows what they’are talking about, they’ll likely just tell you what I just did.

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