Oh, no! You just had a fender bender and now you’re wondering if that accident forgiveness feature you added to your auto insurance policy will pay off. Accident forgiveness is a feature you can add to your auto coverage with some insurers so that it “forgives” the driver if the accident turns out to be your fault. This means an accident you’re at fault for won’t negatively affect you—think a rate hike—as a result.
“Besides an accident counting as in infraction, most policies also include some forms of forgiveness for tickets, particularly speeding tickets,” says Karen Condor, an insurance expert at 4AutoInsuranceQuote.com, an insurance comparison site.
You can usually obtain accident forgiveness one of three ways:
- Add it to your policy and pay extra for it.
- Have it offered for being a safe driver and loyal customer.
- Some hybrid of the two—as a perk for loyalty customers, and a paid option for others who are interested.
- In theory, accident forgiveness sounds like a great deal. Who wouldn’t want to be “forgiven” for having an at-fault accident and have no consequence like your insurer raising your rate?
- Whether the cost of adding accident forgiveness to your policy overrides the cost of any potential rate hike is a decision to weigh carefully.
- You might consider it if you have a high-risk driver, like a teen on your policy.
The Benefits of Accident Forgiveness
You’re a safe driver, right? So, shouldn’t you just take your chances rather than pay extra for at-fault accident forgiveness? Maybe but first review your insurance company’s at-fault accident rate hike numbers and do a cost comparison between those and what you would pay to add accident forgiveness to your policy.
According to Condor, your rates could go up by as much as 50% after an at-fault accident. Plus, even if you’re a safe driver typically, it only takes one mistake to be at fault in an accident. “You can usually add accident forgiveness to your policy for less than $30 a month,” she says. So, the feature can save the average person from a few hundred to several thousand dollars.
The Drawbacks of Accident Forgiveness
Not all accidents automatically raise your insurance rates. The severity and cost of the claim, your driving record, and whether you have other violations all help determine if and how much your rate will increase.
In states with no-fault insurance, in which coverage helps pay for all medical bills, if you’re involved in an injury-related accident, your insurance may consider the amount they pay towards those expenses when deciding if your rate will change after you file a claim.
Accident forgiveness isn’t available in every state nor offered by every insurance company. Plus, some people won’t qualify for it (those with one or more at-fault accidents or moving violations on their record in the past three years), notes Earl Jones, insurance agency owner in Sunnyvale, California.
You can only use it once in a 3–5-year period, so if you use it, you’ll need to wait for your policy to reset to be eligible for forgiveness again.
How Much Can it Save the Average Person?
Though most at-fault accidents do raise your premiums, the amount is determined by each carrier. To add accident forgiveness coverage will likely increase your premium from 2% to 9%, depending on the carrier. How much it saves you overall depends entirely on the accident, your driving record, the severity of the claim, and the carrier’s particulars—mostly things you likely cannot weigh beforehand or know in advance.
What do the Experts Say?
If you’re still on the fence about getting this feature, weigh whether you might need it (a risky driver on your policy), whether it’s free with your carrier, or you must pay for it, and perhaps if you have a clean driving record, ask your agent if you can get it as a loyalty courtesy.
If you’re shopping for a new policy and this feature is appealing, get a few different quotes to see how it works at various insurers and what it costs at each. If it’s affordable and you think it’s right for you, go ahead and sign up.
However, “it’s generally not worth the additional cost if all drivers have good experience and clean driving records,” says Scott Nelson, CEO of MoneyNerd Ltd, a personal finance site.
But if you do sign up, read the contract language carefully as some accident forgiveness policies may not apply to every driver on the policy or only apply to accidents that don’t exceed a certain claim value. Make sure you know what you’re signing up for when it comes to forgiveness.