The ins and outs of accident forgiveness

Tamara E. Holmes

A car crash likely will rattle you physically and emotionally. Yet accident forgiveness programs offered by several auto insurance companies can cushion you financially.

Auto insurers that follow the guidelines issued by ISO, an organization that tracks property and casualty insurance risk, raise customers’ premiums between 20 percent and 40 percent after an at-fault accident. Accident forgiveness programs give some drivers a free pass in case of a crash.

“The thinking behind accident forgiveness is that stuff happens,” says Bob Passmore, senior director of personal lines at the Property Casualty Insurers Association of America, a trade group.

Several auto insurance companies offer accident forgiveness, but the details differ from insurer to insurer.

Bad weather or a momentary distraction can lead to a rear-end collision or a fender-bender. Accident forgiveness is designed to separate those who are accident-prone from those who just happened to have a bad driving day.

All programs are not the same

At the root of all accident forgiveness programs is the premise that an accident will not be considered when figuring your premium. However, companies vary on the specifics. Typically, insurers place restrictions on who can benefit from accident forgiveness programs.

• Most auto insurers require that policyholders be accident-free for a set number of years, which can vary by state even for customers of the same insurer.

• Some insurers make it available only to longtime customers. For example, Safeco requires drivers to be Safeco customers for a certain number of years to qualify, while GEICO requires that policyholders be customers for five years. On the other hand, The Hartford requires that drivers be accident-free for three to five years depending on the state, but it doesn’t matter whether the policyholder was a Hartford customer during that time. Allstate gives policyholders a number of options, with certain policies offering accident forgiveness after a set number of years and other policies giving consumers immediate access.

• Some insurers charge customers a higher premium for the accident forgiveness feature, while others roll it into standard policies at no charge. Progressive, for example, offers accident forgiveness for free to customers who’ve been with the company for four years and who remain accident-free for three years in a row. On the other hand, The Hartford charges about 6 percent for a package that includes accident forgiveness and a number of other features such as emergency expense coverage and a collision deductible that decreases over time.

• Some insurers allow several drivers on one policy to take advantage of the benefit. For example, Nationwide extends its accident forgiveness benefit to teen drivers on an adult’s policy.

Since so many companies offer variations of accident forgiveness, “people need to ask questions about how they work,” Passmore says.

Consumers should factor accident forgiveness into a decision about leaving your current auto insurance company. For example, if you qualify for your insurer’s accident forgiveness program but a new company would require you to be a customer for a certain amount of time before qualifying, it might not make sense to switch companies if the accident forgiveness is important to you.

Proceed with caution

While accident forgiveness may sound like a great deal, some experts warn consumers to think carefully before signing on the dotted line.

Unless the accident forgiveness benefit is free, consumers must weigh the likelihood that they’ll get in an accident against the additional cost they’ll be taking on over the course of several years, says Todd Foreman, a staff attorney for Consumer Watchdog, a consumer advocacy group. A driver who doesn’t get into an accident “wouldn’t take advantage of the benefit but they’d be paying for it for the rest of their lives,” Foreman says.

Foreman also has a problem with the concept of accident forgiveness in general. “It’s sort of unfair to drivers on the road if one insurance customer has an accident and is allowed to pay the same for insurance as another driver who does not have an accident,” he says.

For some insurance customers, price is the most important factor. They prefer to pay the lowest premiums possible rather than cough up money for accident forgiveness, says Randy Termeer, assistant vice president at The Hartford.

Your history on the road

Consumers should be aware that accident forgiveness does not make an accident disappear from your driving record, according to the Massachusetts Office of Consumer Affairs and Business Regulation. Rather, it means that a particular insurer won’t factor one accident into the cost of your insurance premium. If you switch providers, a new insurance provider likely would figure that into your rates. In addition, if you have an accident and the accident forgiveness benefit is applied, you may have to start all over again and remain accident-free for a certain number of years before you can use the benefit again.

Although accident forgiveness rewards safe drivers, those who’ve had accidents in the past should not be discouraged from asking their insurance provider about such programs, as they can start working now toward improving their driving records, Termeer says.

“If the company is offering that program and you can keep your nose clean for however many years it takes to qualify, you too can receive forgiveness,” Passmore says.