Accident Forgiveness: Paying to Insure Your Insurance

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What Is Accident Forgiveness?

You may have heard of a little something called “accident forgiveness,” which is just one of the many new services auto insurers are promoting to snag our insurance dollar.

All of the major carriers offer it, including Allstate, Geico, Nationwide, Liberty Mutual, and so on.

But is it really a good deal, or is it just a sales tactic to keep us loyal to the same insurance company for years to come? Well, it may just be a little of both.

Put simply, your insurance rate will go up if you cause an accident or file a claim – that’s the nature of insurance.

With accident forgiveness, depending on which company you are insured with, you can avoid the increase in insurance premium for that fender-bender.

Accident Forgiveness Isn’t Free

Of course, such a luxury comes at a cost. Your insurance company will charge you more money for your policy when you elect this option.

For example, your premium without accident forgiveness may be $50 per month, or $600 per year. But if you get in an accident, your premium could skyrocket, possibly by over $1,000 annually!

On the other hand, if you opt for accident forgiveness, you should expect your monthly insurance premium to increase, accident or no accident.

A policy with the same liability limits and physical damage coverage of that mentioned above may run as high as $75 or $85 per month, which would bump your overall insurance cost to $900 to $1,020 per year.

That equates to more than $400 in costs for accident forgiveness annually.

However, if you file a claim or receive a ticket, that $900 to $1020 annual premium won’t increase.

Do note that most accident forgiveness programs only forgive you once, although some programs allow multiple “offenses.”

So what’s the final verdict?

Why Accident Forgiveness Is Bad News

– Accident forgiveness as similar to “buying” insurance against a blackjack dealer who is showing an Ace face up in Las Vegas.

It’s ultimately a side bet against a bet you have already made, i.e. that you are not going to get into an accident (or the dealer is not going to have blackjack). Isn’t that what you bought the insurance policy for in the first place…to cover you against claims for damages arising out of an accident you cause?

– As far as ticket forgiveness goes, let me give you some “industry insider” advice. Don’t drive in a manner that puts you at risk of getting a ticket!

Driving too fast or aggressively leads to getting tickets, causing accidents, potentially hurting yourself or others, and paying more money for insurance!

You could make the argument that, by offering accident forgiveness, insurance companies are encouraging morale (not moral) hazards. Ethically, I’m not sure I can support that.

– As discussed earlier, accident forgiveness is a technique insurers use to promote customer loyalty because insurance is highly profitable. Most of the companies who offer this are only offering it to people with the cleanest driving records out there.

If you get into an accident or receive a ticket, contact an independent agent or shop online to ensure you receive multiple quotes from other insurers. You may find your rate with another insurer is comparable or better than what you were paying for the accident forgiveness program.

After all, aren’t all the companies that offer accident forgiveness the same companies telling us we’re already paying $500 too much by staying insured with their competition (switch and save, 15 minutes saves you 15% and discount double check).

Overall, I say skip the accident forgiveness. Pay your normal insurance premiums, drive safely, and if you get into an accident or receive a ticket, shop like crazy for a company that might offer you a lower rate.

I don’t see the point of paying to “insure” your insurance.


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