Key Takeaways: Accident frequency is rising today, and it can be blamed on extreme weather, distracted drivers, and growing congestion on our roadways.From smart phones to severe storms, more vehicles are getting into accidents which directly impacts what consumers pay for auto insurance into the future.While each state has its own set of auto insurance coverage (at-fault vs.

no-fault), consumers often misunderstand how fault is determined and how it can impact their coverage and their premiums for years to come.In this article, we look at the fundamentals of at-fault vs no-fault insurance, as well as strategies on how to minimize premium increases, take advantage of possible discounts, and how to navigate the insurance landscape with confidence.The Basic Differences Between At-Fault and No-Fault Insurance Coverage In the 1970’s, the concept of no-fault insurance was pioneered by insurance companies as a way to simplify the claims process and reduce the number of contentious lawsuits.

Since the traditional at-fault process (or tort system) could be lengthy as the insurance carriers investigate to determine fault, no-fault insurance was designed to streamline the process and provide prompt payment for medical expenses and lost wages following an accident.Today, states determine how they govern the insurance industry and can adhere to strict at-fault or no-fault models or use a hybrid system of statutes.Let’s look at basic differences: At-Fault Insurance No-Fault Insurance Is All No-Fault Coverage the Same? No.

While ‘pure’ no-fault insurance is the law in nine states, at this point in time, including New York, Florida, and Massachusetts, several other states have hybrid insurance options: How Fault is Determined If you are in an accident, it’s important to first ensure everyone is safe or, if someone is injured, to seek medical attention at once.Next, determining negligence is the key to who will be responsible for damages.When insurance companies determine negligence, they use a variety of pieces of evidence, including: Insurance companies want to determine who breached their ‘duty of care’ and if any laws were broken, e.g., speeding, running a red light, etc.

Many states also require companies to use ‘comparative negligence’ or to determine if fault can be shared between all drivers involved.As an example, in a case where it is determined that drivers were jointly responsible (50%/50%), then insurance companies would prorate their compensation/coverage by 50%.How Much Will Insurance Rates Increase Following an Accident? While a number of factors are used by the insurance industry, some internal and some state law mandated, insurance premiums will almost certainly go up following an accident for one simple reason: you have exhibited that you represent a higher risk (even if the accident was not your fault).

An at-fault accident insurance rate increase or surcharge can range from 20% to as high as 80% and last from three to five years.Multiple factors are used to determine the extent of the increase, including severity of the accident (minor collision vs.bodily injury claim), your driving history, length of history with the company, and state laws that govern insurance companies and their ability to raise rates.

For no-fault insurance rates following an accident, rate increases may be less severe since the insurance company’s exposure may be less (reduced medical expenses, less legal exposure).Check with your insurance company now to take advantage of discounts or safe driver incentives, such as accident forgiveness and good driver discounts.This may be beneficial in case you find yourself having an accident in the future, especially if facing increased scrutiny at renewal time or even the potential for non-renewal.

The Ripple Effect Beyond increased premiums, accidents (especially one’s that are caused by risky behavior, e.g., speeding, etc.) can lead to a loss of discounts and safe-driver incentives, as well as higher deductibles.Are Premium Increases Different by State? Yes.Many states allow carriers full range in determining rate increases and other at-fault penalties, while some states, like North Carolina, have strict surcharge schedules that limit insurance companies when it comes to imposing arbitrary sanctions.

What Are Some Neutral Accident Scenarios There are some accident scenarios that most insurance companies treat as neutral or non-chargeable and most likely won’t raise your rates astronomically.These include hit-and-run accidents where your vehicle is hit by someone who flees the scene, significant weather damage, like what’s caused by flooding, hurricanes, or wildfire, and wildlife collisions.How Insurance Companies Assess Risk Insurance companies use actuarial data to predict future behavior.

Makes sense – over time, actuarial sciences have complied massive details on all sorts of behaviors and outcomes to support the insurance industry’s risk mitigation.Vast armies of actuarial scientists compile statistics and historical data that they then feed into predictive modeling tools to determine potential outcomes.The data includes not only our repeatable behavior, but also socioeconomic factors that impact risk, including: In short—they know us better than we know ourselves! With this information, insurance companies use sophisticated analyses to determine our risk profile and how that translates into our auto insurance premiums.

Strategies to Minimize Premium Increases Before or Following an Accident Let’s face it.Sometimes accidents can happen.What can you do to minimize any big premium increases whether you live in an at-fault or a no-fault state? Check Accident Forgiveness Ask your insurance company if they offer accident forgiveness.

It’s become popular as a marketing differentiator over the last few years, so take advantage of it.It is typically reserved for long-time customers with excellent driving records and claims history, but it never hurts to ask.Shop Around It never hurts to shop around from one carrier to another.

Why pay a premium if you can find a company that will charge you less? This is a good exercise following an accident, but also as part of an annual review to ensure you are paying the best price.and see if your driving record doesn’t get you a better price at a different company.You can find widely diverging premiums through a bit of research.

Increase Your Deductible Once you have a higher rate, consider increasing your deductible.The higher the deductible, the lower the insurance premium.It means that you will pay more out of pocket if you have a future claim, but also a lower cost now.

If you opt for this alternative, it’s highly recommended that you keep the amount of the deductible in a savings account so that it’s available when/if needed.Take a Defensive Driving Course Many insurance companies offer discounts for completing a certified defensive driving course (or senior driving course if you are over 50 years old).It is not only a good idea in light of the recent accident but also demonstrates to the insurance carrier that you are committed to reducing possible future risk.

Bundle Your Policies Most people have multiple insurance policies, e.g., auto, homeowners, renters, life.Contact your insurance agent to see if they offer a discount for bundling your policies with one company.Almost all insurance companies offer this discount and are more than pleased to help you bring all of your policies under one company.

Improve Your Credit Score Most companies look at your credit score as an indicator of risk aversion.Someone with a high credit score is considered to be responsible and risk adverse.Conversely, someone with a fair or low credit score is considered to be a potential risk problem.

It’s important to have a strong credit report demonstrating good repayment habits and zero late payments.Most companies are looking for a score of at least 670 but being in the mid- to high-700s or even 800s is even better.Access your from each of the three main agencies and make sure there are no current mistakes or problems.

Avoid Filing Small Claims Each claim brings a potential rate increase.If possible, pay for damage out-of-pocket rather than filing a claim.That way if you have a large claim it will possibly minimize any scheduled rate adjustment.

Maintain a Clean Driving Record A consistently clean driving history will be beneficial and can actually help your insurance rates go down over time.Even infractions such as expired tags demonstrate to the insurance company that you are ok with risk which is a negative in their book.Looking to the Future While states continue to change and update at-fault and no-fault laws, the insurance industry proceeds with a forward-looking view.

For your part, you can continue to manage risk by understanding your state’s specific rules when it comes to fault and ensuring you are covered with the best insurance option available for your circumstances.Should you find yourself in an accident, be sure to compare quotes regularly and find proactive ways to lower your rates when possible.For the future, whether you live in an at-fault, no-fault, or hybrid state, technology is being used to make driving safer and thereby limiting claims by reducing accidents.

Today, vehicles use telematics (where your vehicle collects and transmits safety and behavior data to you and to your insurance company), GPS, sensors, and technology-assisted driving systems that help reduce losses.The long-term consumer impact will hopefully be safer driving and less accidents.Contact to evaluate auto insurance options and discover additional ways to save money.