Car insurance can take a huge chunk out of your budget for many reasons. Your age, location, vehicle or even your credit score may contribute to how much you pay for the annual premium, but actually using your insurance can impact that cost, as well.
Filing an auto insurance claim increases premiums by an average of 44%, according to a study by insuranceQuotes, an online insurance marketplace, and Quadrant Information Services. That’s a nearly 3% increase from last year’s study.
To figure that out, the study authors looked at insurance quotes using a hypothetical driver profile of a 45-year-old married woman who is employed, drives a 2013 sedan, has excellent credit, has no lapse in coverage and has not previously filed an auto insurance claim. Using that same profile but making one claim in excess of $2,000 within a 12-month period increased insurance quotes by an average of 44%. Filing a second claim within 12 months resulted in an average premium increase of 98%. Considering that the national average for annual car insurance premium is $841, according to the National Association of Insurance Commissioners, a 44% increase would add about $370 to the cost — that’s a big budget change.
In reality, it’s not quite that simple. There are a lot of things that affect how much a claim impacts your insurance premium, like the cost of the claim, what type of claim it is and, most important, whether you were at fault. Premium increases after claims also varied by state. In California, a claim of at least $2,000 was found to increase premiums by an average of 78%, while a similar claim led to only a 21% increase for Maryland drivers.
Ideally, practicing safe driving habits will help you minimize the cost of auto insurance. It can also help to keep your credit in good shape, because insurers in many states evaluate credit when determining a driver’s insurance premiums. You can see two of your credit scores for free every month on Credit.com.
You can also save money on your insurance premiums if you pay them with a cash-back rewards card. It’s a great way to reduce your bills as long as you pay off your credit card in full each month.
More on Cars:
- Are There Car Loans for People With Bad Credit?
- What’s a Bad Credit Score?
- How Credit Impacts Your Day-to-Day Life