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Lee Romanov (Charla Jones/Charla Jones/THE GLOBE AND MAIL)
Lee Romanov (Charla Jones/Charla Jones/THE GLOBE AND MAIL)

It's Covered

Forgive me ... forgive me not Add to ...

'Accident forgiveness" and "claims protection" are terms used in advertising campaigns by auto insurers, and sound as though your insurance rate won't increase if you have an accident. But that's not necessarily what they mean.

Accident forgiveness

Accident forgiveness is a rating system some insurance companies use when determining what you should pay after you have an accident. Accident forgiveness cannot be purchased. It is used by some insurance companies to determine what percentage or dollar amount your rate will increase or adjust to after you have an accident.

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Note: Some companies will sell you coverage that you can buy to protect your insurance rate from increasing, and call it accident forgiveness, however, it's actually "Claims protection."

In the accident forgiveness system, a "six-star" driver is usually the designation used for a good driver. If you've been involved in an accident where you were partially or completely at fault, your rating might drop down to a "four-star,' "two-star," or even a "zero-star" rating. Simply stated, this means that your rates will significantly increase.

Your star rating reflects your premium cost. The lower your star rating within your insurance company, the higher your insurance rate will be.

However, it is important to note that each insurance company applies their own rates to their star designations. For example, if you're a six-star driver with insurance company A, you could be paying $1,400 annually, whereas with Company B you might pay only $1,100.

There are no industry rules on how many stars a driver with an accident can drop. Each company applies their own star designation for an accident.

When you compare star rates between insurance companies, a lower star rating with one company could actually be less expensive than a better or higher star rating from another company. For example a three-star driver with company B could be paying less after one accident than a four-star driver with Company A.

It generally takes six years for an accident not to affect your insurance rates. At that point you should resume your six-star rating.

So, there is no actual forgiveness. Your rate will probably still increase and the accident will be counted against you for six years. Furthermore, most accidents come with tickets. A ticket can affect your insurance rate for three years.

Insurance companies that do not use the accident-forgiveness star-rating system simply use their own rating chart to determine what your premium will increase by when you have an accident.

The term accident forgiveness appears to have grown into a marketing tool that leads some drivers to believe that if they're a six-star driver they're paying the best rate. While it might the best rate that insurance company has, it may not be the best rate available to them from other insurance companies.

On average there can be a $750 difference between insurance company rates based on one driver with one car. Multiple drivers with multiple cars can have rates that differ by thousands of dollars.

The star rating system can also make you feel that you're getting a better deal when your rate increases, if you're told that your star rating only dropped by two stars instead of four stars.

Claims Protection

Claims protection means that your rate will not increase if you have an accident, but your accident will still remain on your record.

This coverage is not automatic. You will not only have to purchase it, but qualify for it as well. The qualifications are usually based on having driven for a number of years accident-free.

Before you lock yourself into a company offering claims protection, make sure you're with the insurance company that has the best rate for you.

Many drivers feel that once they've had an accident no other company will want them. This is not true. I've seen drivers find a better rate having had an accident, as opposed to when they were accident-free. The reason is relatively simple; they were with an overpriced insurance company to begin with.

Lee Romanov is an insurance consumer advocate and creator of www.romanovreport.com .



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