With having your own vehicle comes other factors, like maintenance and short-term insurance covering your motor vehicle. If your car is financed, your credit institution will require you to take out an auto policy.
Your premium will depend on various factors, including your age, your driving history, the value of the insured item, how long you have had your license, and so on. These factors are combined to formulate mathematical methods for the insurer to calculate the risk they’re taking by insuring you. Let’s look at why insurers increase your premiums after an accident.
Your Risk Profile
All insurance companies have actuarial consultants who determine which risks are higher and which are lower. A high-risk client is a client who will most likely submit an insurance claim within the first year of taking insurance. A low-risk client is someone who has never submitted a claim from an insurer in more than ten years while paying for policies.
Every time an individual lodges a claim for their vehicle for an incident that was their fault, the insurer will increase their premium following the increased risk they face by insuring you.
Most insurance companies do it in different ways; with some, you might get a letter some days after the claim informing you of an increased premium within the next 30 days. At other institutions, you might only have your premiums increased after your next policy renewal, which is your policy’s anniversary.
Insurance companies share your insurance history to ensure they never insure risks they’re not willing to take. In other words, they work together to decrease risks.
Depending on your provider, these incidents causing increased risk will only last about three years after the incident took place. With other insurers, you might pay for these incidents for even longer.
This cooperation between short-term insurers also means canceling your policy and moving to another institution as the new insurer will have all information about your claim history, and they’ll charge you accordingly.
Remember, different types of incidents could result in various types of action from your financial institution. Different incidents also call for different magnitudes of collision repair, which will affect the cost to the insurer.
An incident where you were the victim and someone else was at fault could mean your insurer will receive the funds from the responsible individual’s insurance, and they might not even touch your premium.
More reckless behavior from the insured, like a driving under the influence incident, might mean your insurer will cancel your policy overall. When this happens, it will be challenging to find alternative insurance.
Always remember that insurance is a vital financial product that can potentially save you from a financial nightmare. It is a product that only becomes of value when an incident occurs, and when it does, you’ll be in good hands.