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. Think of it as the upsale at checkout.

All of the major carriers offer some form of accident forgiveness, including Allstate, Geico, Nationwide, Liberty Mutual, and so on, though it may not be available in every state.

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

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

However, it typically only saves you on your first at-fault accident. If you get into a second one, you’re probably on your own.

If you happen to have multiple drivers on your policy, including those dreaded teenage drivers, they might also be covered under this policy add-on. And that could amount to some big savings if they happen to mess up.

One caveat is that you generally need to be a good driver to get this coverage. This means accident and violation free for some prior period of time, say 3-5 years. You can’t have a blemished record and expect an insurer to extend this coverage to you. It wouldn’t be very smart.

That being said, 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.

Accident Forgiveness Isn’t Free

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Accident forgiveness comes at a cost. Car insurers aren’t just offering this potential lifesaver out of the kindness of their hearts.

Your insurance company will charge you more money when you elect to tack on this option to your policy.

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.”

The other catch is that you’re basically stuck with the insurer that offered accident forgiveness because you’ll likely be charged more elsewhere with an at-fault accident on your record.

So what’s the final verdict?

Why Accident Forgiveness Is Bad News

– Accident forgiveness is 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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