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Perks and pitfalls of accident forgiveness


Accident forgivenessCar accidents are cringe-worthy on many levels. Beyond the potential for bodily harm and vehicle repair hassles, there's the anxiety over how your car insurance premiums will be affected, adding insult to injury. Depending on the collision, your driving record and other factors, your costs could rise significantly.

You may think an accident automatically triggers higher car insurance rates, but that's not always true. "Accident forgiveness" is one of the car insurance discounts that you may have heard about but don't fully understand. Most major insurers -- including Allstate, GEICO, The Hartford, Liberty Mutual, Nationwide, Progressive and State Farm, among others -- offer it to their best customers, those without past accidents and moving violations.

Do car insurance companies really forgive and forget?

In general, it works this way: If you have a clean driving record, the insurance company will ignore the first accident and not raise your premium. Additionally, your deductible could drop by as much as $100 each year you maintain a spotless record after the mishap.

The details, however, vary from company to company. Some may give you accident forgiveness immediately, while others will only do so after you've been an accident-free policyholder for as many as five years.  Still others may forgive one accident per policy in a three year time frame, some will forgive one every six years and some will waive one per driver listed on the policy every 3 years. You may also be required to have had no moving violations for three years. If you're considering signing on for accident forgiveness, you need to talk with agents and read the fine print to understand the details of how to qualify.

Once you study that fine print you'll see that this feature is not usually free, even with a perfect driving history. At Allstate, for example, you get accident forgiveness by upgrading to either a Gold Protection or Platinum Protection package under its Your Choice Auto plan, which can add about 8 to 15 percent to the cost of a standard policy, depending on the vehicle owner.

Under Gold, you're forgiven for only the first accident. With the more expensive Platinum, your rates won't rise even with subsequent accident claims. But, the insurer points out, you may become ineligible for Platinum if you rack up several crash claims.

How to figure out if accident forgiveness is worth the cost

So, if you're a great driver with no smudges on your record, is it a good idea to pay more for the protection or take the chance that your motoring skills (or luck) will continue?

Insurance.com recently did an analysis to determine how much an accident claim could affect premiums. It found that the rate jump will vary by insurer and state; some might not raise your rates at all -- but most will. To get a general idea of a crash's impact, it looked at rates from five insurers for a 30-year-old Dallas motorist with a clean record driving a 2014 Chevrolet Cruze. Then it added an accident that included a liability claim and a collision claim totaling $1,400. Insurance.com found that the premiums could jump anywhere from 23 percent to a high of 97 percent, depending on the company -- eye-opening numbers.

But if you're a careful driver, it may not be prudent to pay extra for accident forgiveness – you may be better off just driving with caution and then shopping for the best rates should you get into a wreck.

One way to tell if accident forgiveness is a good fit for you is to compare the extra cost of the perk with how much your car insurance company will hike your rate for an at-fault accident, says Penny Gusner, consumer analyst for Insure.com. "Each car insurance company has a surcharge schedule that outlines the percentage increase that specific infractions trigger, such as an at-fault accident," she says. "By asking your insurer for a copy of this and researching the potential rate hike for an accident, you can do the math to see if it's worth paying extra for accident forgiveness or paying the rate increase for a wreck should you have one."

The Insurance Information Institute echoes that advice. Michael Barry, the vice president of media relations for the Institute, points out that the III does not have an opinion on accident forgiveness but it does have a strong position on consumer awareness.

"In our view, the policyholder needs to quiz either their insurance agent or insurance company representative about the pros/cons of accident forgiveness" before buying the provision, he says. "Education, knowing what you have and what you need, is always a great idea."

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8 Responses to "Perks and pitfalls of accident forgiveness"
  1. Terri

    I have been with Erie Insurance for 18 years. They have first accident forgiveness. My daughter and I were in an accident about 1.5 years ago that resulted in $4,100 worth of damage. Not only did they cover it, they went to arbitration against the other insurer, who claimed we shared fault because we were going 5 miles over the speed limit at the time (obviously they never drove in NC). After that accident I fully expected to have a surcharge with any subsequent accidents, but was informed that as I had been with them over 15 years I would never get a surcharge for an accident. I have found that their rates in this area are competitive with all the other insurers. It might behoove some of the posters here to shop around. Most people I know have never heard of Erie. I will be staying with them.

  2. Steven Harrison

    From the sound of it, it seems I had it pretty lucky. I had a car accident a few years ago and my auto insurance company forgave me, even though I was only on the policy for just over three years. According to the post, there's a broad spectrum there, and I got the better end of the deal.

  3. Fernando

    Today I was told that Geico Accident Forgiveness doesn't apply in California. Is this for real?

  4. Greg

    I was told today that my Geico forgiveness was only good after being with them for 5 years.

  5. Jesse Allen

    I made a mistake and backed into my nephew's parked vehicle. I called in the claim. He got his vehicle repaired and the cost was over $3,000. I received two points on my insurance. My monthly payment jumped from $77.00 a month to $130. I have a clean record and had it for clean for several years. Can I receive any credit or reward for a clean record?

    1. Tony March 14, 2017 at 12:06 PM

      Same thing happened to me with Liberty Mutual. I rear-ended someone from just 12 inches away. It was $400 damaged bumped up to $5,220. My rates jumped from $80 a month to $130. I did not received "Accident Forgiveness." It didn't help that it is in Massachusetts, which penalizes drivers for six years with 00 point rating.

        Reply »  
  6. Zoe

    Thanks for this article! We were recently in an accident caused by someone else, but it ended up as a 'he said she said' claim. We have 'accident forgiveness' on our policy. Our insurer has done very little to try to defend us, resulting in a dual-fault determination. We would prefer to change insurer, but it now makes financial sense to stay with the one we already have. So they have assured themselves of several years more business by not working for their client who has paid for this additional coverage. Perhaps our money would have been better spent on a dashboard camera to prove we were in the right (which we now intend to do).....

    1. john January 08, 2015 at 10:50 AM

      @Zoe: Who was your insurer? Why wouldn't you include that bit of info?

        Reply »  
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