PhotoIt's generally assumed that insurance rates will go up after you have an accident and file a claim, but by how much? More than you might think, according to a report by insuranceQuotes.com.

The survey found the average driver will face a 44% rate hike after a single claim of over $2,000.

The biggest increase would come if you happen to live in California. There, a driver making a first claim would face an average increase of 78%. Massachusetts and Wisconsin are nearly as expensive, with average rate hikes of 67% and 54% respectively.

On the other hand, claims are less expensive for drivers in Maryland, Michigan, and Oklahoma, who see their rates rise between 22% and 25%.

Second claim

If you have an accident and make a claim, the only worse thing you can do is have another accident and make a second claim. The study says your insurance rate will be twice as high as a driver without a claim.

“Previous claims are a big factor in car insurance rates and can affect the amount you pay for years,” Laura Adams, senior analyst at InsuranceQuotes, said in a release. “If you get a rate hike for making a small claim, it could end up hurting your finances over the long run. In some cases, not making a claim can be a smarter move.”

That's a hard concept for many consumers to grasp. You pay for insurance every month, so why can't you use it when you need it?

That's certainly a rational argument, but unfortunately that's not how the insurance system works. Insurance is all based on perceived risk – the chances you will file a claim that costs the company money.

Insurance companies believe that once you file a claim, chances are good you will file another at some point. Fair or not, under the concept of shared risk, you'll be penalized.

Judgment call

It becomes a judgment call when it makes economic sense to file an insurance claim and when it pays to pay for damage yourself. InsuranceQuotes.com has this handy calculator to help you figure it out.

Why have insurance at all if you are penalized for using it? Good question. In a majority of cases it would pay to “self-insure,” putting the money you would pay for car insurance each month into a savings account.

Unfortunately, your self-insurance policy would not be able to cover all potential accidents – which could run into the hundreds of thousands of dollars in damage and liability.

That's why every state requires motorists to carry auto insurance, or pay into a state-maintained “uninsured driver” fund each month.

The best thing a driver can do is put the phone away and drive carefully.


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