You’ve seen the commercials on television where insurers advertise their accident forgiveness add-on to auto plans. Chances are the feature has even piqued your interest, at least enough to give the ad your full attention. After all, it’s an intriguing option – especially when you consider that a single accident claim can increase your insurance premium by up to 40 percent each year. If you’ve had the misfortune of filing two accident claims in a year, your car insurance premium can potentially double.
Nobody wants to pay more than what’s necessary for car insurance, especially when you consider that insurance is one of the “necessary evils” of owning or leasing a vehicle. And that’s why adding accident forgiveness to your plan is an intriguing option for many, as doing so is a way to ensure that your premiums won’t escalate if you’ve been involved in an accident. As the end of the year is typically a time for consumers to reassess their spending and set budgets for the new year, we decided to take a closer look at the pros and cons of accident forgiveness.
The Advantages of Accident Forgiveness
The biggest benefit of adding accident forgiveness to your plan is that for a little bit more money, it’s essentially a way to ensure that you won’t be paying out the nose for a premium increase should you be involved in an accident. That can be appealing to many drivers, especially those who drive a lot and thereby have increased odds of being in an accident. It can also be appealing to those who have a history of traffic vehicle accidents. Considering that increased premiums after an accident can follow you around anywhere from three to five years, adding accident forgiveness can provide a significant savings.
Another benefit to accident forgiveness is that some insurers offer it as a reward, either for your long-term loyalty or because you have a clean driving record. When accident forgiveness is offered complementary, it doesn’t make sense to turn it down.
Some Serious Drawbacks
There are a few notable cons associated with accident forgiveness. For starters, you have to qualify for it. Typically, accident forgiveness is only offered as an option to drivers that have a clean driving record dating back three to five years. So if you’ve been in an accident or received a ticket recently, you’re out of luck.
Secondly, accident forgiveness is essentially insurance on top of insurance. Do have a product protection plan on your cell phone? Think of accident forgiveness insurance in a similar fashion, as you’re essentially paying for an unknown. Sure, it’s great if you need to use it – but if you don’t, you’re basically paying anywhere from 2 percent to 9 percent more on your car insurance premiums for a benefit you didn’t use.
Finally, there are a few other things that are worth pointing out about accident forgiveness. For instance, if you have it and are involved in an accident, your premiums won’t go up because of the accident – but they still could increase in other ways. How? Because your involvement in an accident could void any safe driver or accident-free discounts that you previously qualified for. Lastly, accident forgiveness isn’t an option everywhere, mainly because it’s difficult in some areas to get it cleared with state departments. For instance, if you live in California and want to add accident forgiveness to your plan, you’re out of luck. It’s not offered there.
If you’re interested in adding accident forgiveness, we’d encourage you to weigh the aforementioned pros and cons. Also be sure to try to estimate, to the best of your ability, what the premium increase would be if you were in an accident and had accident forgiveness versus what you’d be paying for accident forgiveness. We’d also encourage you to do some shopping around and see what other discounts you qualify for with various insurers.
While accident forgiveness can make perfect sense for some drivers, it might make no sense for others. And being that the end of the year is coming, it’s an ideal time to reassess your plan as you set your budget for 2019.
Regards,
Ethan Warrick
Editor
Wealth Authority
