How Does Accident Forgiveness Coverage Work?

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Auto insurance gives compensation for damage caused by auto accidents at the cost of a monthly fee or premium. The premiums you face are based, in part, on your claim history. Each time you make a claim to get cash for an accident, your insurance company may increase your premiums. Accident forgiveness is a feature of certain auto insurance plans that keeps insurance premiums from going up after a crash.

Accident Forgiveness Basics

Accident forgiveness is a guarantee that your insurance rates won't go up after your first accident while under an auto insurance plan. In some cases, a forgiveness plan may allow you to avoid premium hikes after multiple accidents. Accident forgiveness plans also can include deductible reductions, where your deductible -- the upfront cost you have to pay when you make a claim -- decreases by a certain amount each year that you don't get into an accident. Auto insurance providers offer accident forgiveness to attract new customers, build consumer loyalty and increase profits.


Eligibility for accident forgiveness varies from one insurer to another. Some insurance companies only offer accident forgiveness to loyal customers who have maintained coverage for several years. Insurance companies also may look at your driving record to determine if you qualify. If you don't have a clean driving record that shows no accidents or speeding tickets for the last several years, you might not be eligible for coverage.


Although accident forgiveness can keep your insurance costs from going up after a fender bender, it might not end up saving you money. Plans that include accident forgiveness as a standard feature may have higher premiums than plans without it. In some cases, accident forgiveness is an optional feature that costs extra. In other words, accident forgiveness often means paying higher premiums now to avoid possible premium increases in the future.


In practice, all accident forgiveness means is that your current insurance company won't consider an accident when calculating your premiums. Accident forgiveness doesn't erase a crash from your permanent driving record, so if you switch insurance companies, you might end up paying extra for an accident that was forgiven by your previous insurer. In addition, your insurance company could drop your coverage when it comes time to renew your plan if it considers you too great a risk to insure after you have an accident.