Accident Forgiveness: How Much Does Insurance Go up After an Accident?

A good driving record is expensive. Simply put, it allows you to secure lucrative auto insurance discounts. Equally as important, an accident-free history enables you to retain relatively low premiums. After all, the cost of insurance goes up by a great degree after an accident. However, does that mean that you should enroll in (and pay for) accident forgiveness coverage?

The answer to that question truly depends on several factors, including your age, where you live, and any current discounts that your insurer is offering. At times, the cost of this coverage exceeds the potential premium hikes. Yet an accident forgiveness policy could also cushion and minimize the financial impacts of a collision or a car crash.

The Cost of Insurance: Before and After an Accident

The average auto insurance policy costs $1,566 per year, which is equal to $130 per month. After an accident, the premiums may increase by up to 44%. Dollar-wise, the price change is the equivalent of about $600 annually or $50 monthly. Equally as important are the good driver discounts, which can be anywhere from 10% and 40%. Since these incentives also go away after an accident, we should include them to evaluate the true change in premiums. Based on the average price on an auto policy, the 10% to 40% discount is about $13 to $52 per month (or $157 to $626 per year).

In light of this, the total cost of insurance goes up by a minimum of $60 (monthly) or $720 (annually). To clarify, let’s assume that a policyholder pays the average $130 per month/$1,566 per year. After an accident, their monthly premiums will rise to $177 ($2,124 annually) due to the initial price hike. However, if the policyholder also had a 10% to 40% good driver discount, they would pay a total of $190 to $230 per month after an accident.

What You Pay: Higher Premiums vs Accident Forgiveness

Adding accident forgiveness to your insurance plan is only worthwhile if the costs outweigh the potential premium hikes. For the most part, insurance companies will charge between 2-9% of the policy’s price for accident forgiveness coverage. A policyholder who pays the national average premium would see their monthly bill increase by about $3 to $12 (or $31.32 to $140 per year). This change is minimal in comparison to the premium hikes, but it doesn’t give us a fully clear picture of whether accident forgiveness is worth it or not. There are other important factors to consider, including the policyholder’s age, original good driver discount rate, and location.

Location, Age, and Other Factors

Insurance Prices Across State Lines

Across the country, an accident will increase a driver’s insurance bill for three to five years. The premiums, meanwhile, increase at a different rate from one state to another. For instance, in Maryland, insurance goes up by 22% after an accident, half the national average rate hike of 44%. In California, meanwhile, premiums will climb by 86% (or almost double the U.S average). Because of this, a policyholders’ location may determine if accident forgiveness coverage is a financially good idea or not.

To illustrate, let’s assume that two policyholders pay $100 per month on the exact same policy. The two of them live in Maryland and California, respectively. The Maryland policyholder wants to add accident forgiveness coverage, but that would cost them an extra 6%. After three years pass by, this would amount to an overall of increase 24%, which is more than the 22% premium hike after a crash or collision.


Insurance premiums go down as drivers get older. A 20 year-old, for instance, pays an average of $1,102 to to $3,816 per year on auto coverage. A 35 year-old’s premiums, meanwhile, only cost between $552 and $1,907 annually. To put it another way, the 35 year-old pays half of what a 20 year-old driver does. Age, in itself, is a factor that determines whether accident forgiveness coverage can help policyholders save money or not. While the cost of insurance goes up after an accident, a person’s age might largely minimize the increase. This is because the premium changes become lower as the policyholder gets older.

A 16 year-old driver, for instance, has an average yearly bill of almost $4,700. By the time that they turn 20, the policyholder’s annual premiums will become $2,500, which is almost half of what they paid five years earlier. As a result, the driver might opt out of accident forgiveness coverage since their insurance bill will go down in any case. A 45 year-old policyholder, on the other hand, only pays an average annual average of $1,200. By their 55th birthday, the same driver’s annual premium declines to $1,100 (which is less than 10%). Because this change is relatively minimal (especially in comparison to the 44% price hike after a crash or collision), the policyholder might decide to add accident forgiveness coverage to maintain their current (and low) bill.

How the Price of Insurance Goes up With Inflation

Every year, auto-coverage premiums climb by an average of 6.6%. After five years go by, this increase would equal almost 35%. Since insurance prices will go up whether or not a policyholder gets into a crash or collision, some people may wonder if they need an accident forgiveness plan. In fact, paying for one would make the annual premium hikes even more costly. Alongside inflation, coughing up an extra six percent on accident forgiveness coverage, for example, means that premiums will go up by 12.6% annually. Nonetheless, in order to evaluate how much you truly pay (or save) with an accident forgiveness policy, several factors should be considered.

First of all is the cost of this coverage. At a relatively low rate, accident forgiveness would add another 2% to your annual premiums. With inflation, the total increase is only 8.6%. This is only one-fifth of the 44% price change after an accident, without including the loss of the ‘good driver’ discount. In other words, a policyholder may benefit from paying an extra 2% per year on accident forgiveness coverage.

However, if the policy cost an additional 9% per year, the story might look different. That is to say, when coupled with inflation, the policyholder’s premiums would increase by almost 16% annually. Within three years, this cost would surpass the 44% accident price change. In a state like Maine, accident forgiveness coverage (when added to inflation) would hike premiums by almost the same amount as a collision or crash would. The coverage, therefore, may not be worthwhile. Secondly, age and location will crucially influence your insurance premiums. Because of this, they should be added to the equation as well.

Premiums, Costs, and Savings

To summarize, accident forgiveness coverage is truly worth it when you want to avoid higher expenses after a crash or a collision. However, this is only the case when the additional costs offset the potential premium hikes. A driver’s age and location, alongside their current good driver discount, determine whether or not an accident forgiveness plan is worth it. Additionally, insurance goes up every year because of inflation, which is another factor that you should keep in mind.

An accident-free driving record is very valuable. To what extent? That depends on the financial and insurance decisions that you make.

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