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Accidents and the loss of car insurance coverage

On Behalf of | Aug 7, 2023 | Car Accidents |

Car accidents in California can be one of the most stressful experiences a driver can have. In addition to potential injuries and financial losses, there are almost always insurance-related repercussions. Insurance companies will frequently increase premium rates after an accident. But they also may terminate coverage and leave a driver without protection at a critical time. These cases are serious and require immediate attention from a driver.

How car insurance rates work

Car insurance companies determine rates by the amount of risk they think they are taking on by providing a driver with insurance. Risk is determined by several factors, including age, driving history, and the type of vehicle driven. Companies increase rates whenever they determine that a driver has a greater chance of costing them money. This process, of course, accelerates when a person gets into an accident. Every accident shows the insurance company that the driver is a greater risk and leads to a consequent increase in premiums.

What leads to dropped coverage?

Car insurance companies make money off of underwriting drivers. Their preference is to charge reasonable or high rates to drivers so that they can retain those customers for years or even decades. But when an insurance company determines that the risk of a driver exceeds potential returns, they will drop the driver’s coverage. Every company has a different way of determining how many car accidents over a one-year or three-year period are too many.

In some instances, companies can cancel coverage within a brief period of time and put considerable pressure on the driver to find another plan quickly. They may have to buy insurance specifically tailored to high-risk drivers. But even if they do, they need to buy this plan to avoid any gaps in coverage.