Accident Forgiveness 101

Accident Forgiveness sounds wonderful, especially for those of us who have an accident or two.  Here is a little insight to help you decide if this is the type of policy for you.  For a lot of people, price is the bottom line.  For others the security of knowing their premiums will not increase beyond their budgeted amount is important.

Did you already know that an accident, claim or moving violation would increase your insurance rates?  The insurance company can charge you higher premiums for 36 to 60 months depending on the insurance company, for a claim.

Accident forgiveness is offered by some insurance companies as a way to forgive an accident, claims or moving violations so that your rates do not increase.  The accident still shows up on your claims history, but is not counted as a rating factor or increase in your policy. Sounds great, doesn’t it?

Here are a couple of pointers when considering this type of policy:

Who is eligible for accident forgiveness?

  1. Many insurance companies will look at your driving and claims history.  Any many of the insurance companies will only offer accident forgiveness to those with a clear driving record, no tickets, no accidents, and no claims within a 3-5 year time period.  This time period varies depending on the insurance company.
  2. Some insurance companies will offer accident forgiveness to brand new customers, and some will require a longevity period with the company or require you to carry higher limits on your policy.
  3. Most likely, if you are willing to pay the additional premium to have accident forgiveness, there is an insurance company out there who will sell you a policy.

Accident Forgiveness Pros:

  1. Your first accident is forgiven, which means the insurance company will not increase your premium or charge a surcharge to you for that accident.
  2. Accident forgiveness allows you to manage your budget easier by knowing you will not have the surprise of an increase for 3 – 5 years because of an accident surcharge.

Accident Forgiveness Cons:

  1. The premiums are on average 40% to 50% higher than a policy offered by the same company without the accident forgiveness feature.  So yes, they will forgive your accident, but they are charging more for your premium upfront.
  2. Accident forgiveness does not remove an accident, claim or moving violation from your driving record.  Therefore you are still given points by your state and some states charge you for these points.

Accident forgiveness is not a transferable part of your insurance policy:  in other words, should you change insurance companies or move to another state, the time spent building the claims forgiveness is lost, and you have to start over with a new policy.  So all the time you spent paying the higher premium for that option on your policy is not carried over in the same way longevity would be.

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