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UPDATED: Mar 13, 2020
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Let’s face it, driving is hazardous. It does not always seem so, but according to the National Highway Traffic and Safety Administration, more than 34,000 car accidents happened in 2009 alone. And that number only represents fatalities – add on the number of fender benders and rear-end collisions and the number would be significantly larger. Historically, it has been a well-known fact that insurance companies increase a person’s premiums after an accident. That is starting to change, with many insurers now offering an optional insurance benefit called single accident forgiveness.
What is Accident Forgiveness?
The car insurance feature known as accident forgiveness functions as a mechanism for drivers to keep their insurance rates from changing if they happen to be involved in one accident. Some insurance companies also include certain types of moving violations under the benefit as well, such as a first speeding ticket. The feature is becoming more popular; in fact some insurance companies automatically add it on to every customer’s policy that qualifies.
Some insurance companies charge a small fee for the accident forgiveness feature, and others put it into the policy with no charge and use it as a benefit to attract customers. Usually, auto insurance premiums will increase for each ticket or accident a person has. Insurers do this as a way to compensate for the additional risk that comes with insuring risky drivers, since statistics show that drivers involved in one accident are more likely to be involved in anther one.. On insurance policies that have single accident forgiveness, the insurer has agreed that it will not raise the policyholder’s premiums for the first-occurring accident within a certain time-period.
Qualifying for Accident Forgiveness
Insurance requirements and laws vary by state, and the cost and availability of the accident forgiveness benefit may vary based on the geographic area a person lives in. Not everyone qualifies for the benefit, and each insurance company usually has a variety of different conditions and terms that need to be met regarding the accident forgiveness benefit. Typically, drivers need to have a clean record for at least 3 to 5 years to qualify. Consumers should read all of the fine print on their insurance policy to see what the actual terms are for the accident forgiveness feature. Some insurance companies do not offer accident forgiveness benefits right away. Allstate, for example, requires drivers to have a clean driving history for five years before they can take advantage of the feature.
Why do Insurance Companies Offer Single Accident Forgiveness?
The accident forgiveness feature is not a new invention for insurance companies. However, especially in recent years, insurers have used this feature as an extra incentive to bring consumers over to purchase insurance from them. Historically, even one accident could cause a person’s insurance rates to skyrocket, with some companies raising insurance premiums by as much as 40% when the policyholder is at-fault in an accident. Consequently, in tough financial times a product feature such as accident forgiveness becomes very appealing, especially for consumers who cannot afford to take any chances with their finances.
Is Single Accident Forgiveness Free?
Insurance companies would like consumers to think that accident forgiveness has no price attached to it, but this is just a myth that continues to perpetuate. The options of accident forgiveness and single moving violation forgiveness can reduce premiums or at least keep them the same, although they certainly do not come for free.
Every insurance company has a staff of actuaries, or professional mathematicians who spend their days analyzing years and years of driver statistics in order to choose the right pricing and discount amounts for car insurance. Insurance companies need to make sure that even if policyholders have accidents and claims need to be paid out, the insurance company can still stay solvent, or preferably, make a profit.
Making a Wise Investment
The policyholder may receive a discount on his car insurance for selecting a single accident forgiveness option. As mentioned before, since insurance is a competitive business, most insurers are forced to keep their rates as low as possible while still making sure that they can make a profit. So, when an insurance company does not raise rates on a driver’s first accident, they make up for that extra risk by slightly increasing premiums all around for auto insurance, charging slightly more than they would otherwise.
This is not to say that accident forgiveness is not a valuable benefit for consumers. However, consumers should make a point when shopping for auto insurance to compare the base price of insurance without accident forgiveness against policies that include this feature. Once a consumer finds an insurance company that offers low premiums, the small investment in the price of accident forgiveness may be well worth the cost. Another way of looking at the charge for single accident forgiveness: paying it is still going to be cheaper than paying for a large premium increase in the case of an accident, which makes this a wise investment.
Do I Really Need it?
For careful drivers with a good record, who do not spend a lot of time on the road and are not likely candidates for an at-fault accident, paying for single accident forgiveness is probably unnecessary. Single accident forgiveness may be of benefit when adding a teenager to the family insurance policy, though. Before signing up for it, consumers should check with an insurance agent to see if accident forgiveness is already included, based on the fact that premiums have already increased because of the teen driver’s additional risk. An agent should be able to tell the policyholder approximately how much the premiums would increase from a teen’s first accident, and then costs can be compared against a basic policy using this number.
Shopping for Single Accident Forgiveness Insurance
For consumers who are interested in purchasing a policy with single accident forgiveness, shopping with several companies to compare quotes is an easy way to get the lowest price on this type of policy. Investigating several insurance providers is worth the time it takes, since every insurance company builds its own internal premium calculation models and the same person may receive several quotes that show a surprisingly wide price range across insurance companies.