Deciding whether to add accident forgiveness to your auto insurance policy involves weighing multiple factors. This coverage can prevent a significant increase in your premiums after your first at-fault accident, but whether it’s financially beneficial in the long run depends on your specific circumstances including your driving history, age, location, and the details of your insurance policy.
Understanding Accident Forgiveness
Accident forgiveness is an insurance feature that prevents your premiums from increasing after your first at-fault accident. While this can offer peace of mind, the cost of adding this coverage varies and may not always be justified by the potential savings.
The Financial Impact of an Accident
Without accident forgiveness, the average auto insurance premium of $1,566 per year could increase by up to 44% following an accident. This could mean an additional $600 annually, pushing monthly payments from $130 to approximately $190. When combined with the loss of good driver discounts (ranging from 10% to 40%), this increase can be even more significant.
Cost vs. Benefit of Accident Forgiveness
The cost of adding accident forgiveness typically ranges from 2% to 9% of your premium. For an average policy costing $1,566 annually, this could mean an increase of $31 to $140 per year. This additional cost is generally much lower than the potential rate increase from an accident, making the coverage seem like a good investment at first glance.
However, whether it is worth it depends on:
Your Location
Insurance rate increases after an accident can vary dramatically by state. For instance, in California, premiums may nearly double, while in Maryland, the increase is closer to 22%. If you live in a state with lower post-accident rate hikes, the cost of accident forgiveness may not provide significant savings.
Your Age
Younger drivers typically pay higher premiums, which decrease as they age and gain more driving experience. A younger driver might benefit more from accident forgiveness due to their initially higher rates, whereas an older driver with a long history of safe driving and lower base premiums might not see as much benefit.
Frequency of Accidents
If you have a clean driving record and rarely get into accidents, the additional cost of accident forgiveness might not be worth it. Conversely, if you’ve had minor accidents in the past, investing in accident forgiveness could potentially save you money in the long run.
Inflation and Premium Increases
It’s also important to consider the natural rate of premium increases due to inflation, which averages about 6.6% annually. Over five years, this alone could increase premiums by nearly 35%, irrespective of any accidents. Adding accident forgiveness could further compound these increases, making it crucial to calculate whether the potential benefits outweigh these costs.
Making the Decision
Ultimately, the decision to add accident forgiveness to your insurance policy should be based on a comprehensive evaluation of your individual risk, financial situation, and the specifics of your insurance policy. Consider the following steps:
- Assess Your Risk: Consider your driving history, how often you drive, and your typical routes (e.g., high-traffic urban vs. rural areas).
- Compare Costs: Look at how much accident forgiveness will add to your premiums versus the potential increase from an accident.
- Evaluate Your Financial Cushion: Determine if you could afford higher premiums after an accident without significant financial strain.
- Consult with Your Insurance Provider: Discuss how accident forgiveness works specifically with your policy and what conditions apply.
Conclusion
Accident forgiveness can be a valuable addition to your auto insurance policy under the right circumstances. By carefully assessing your personal needs and the specific terms offered by your insurer, you can make an informed decision that balances cost with financial security.
