Vandalism is just one claim type, though often overlooked.
Up until 2010, claims costs have overall enjoyed stability of claim costs, even though the average claim has been increasing. This is due to the decrease in claims frequency. However, 2010 and 2011 saw an increase in claim frequency and claim severity according to the Insurance Research Council (IRC). Contributing to these increases are the increasing severity and amount of PIP claims from no fault states like Florida, Michigan, and New York.
To mitigate some of the contribution of PIP losses, Florida has recently passed legislation that only allows up to $2500 in medical costs for injuries that are non-severe. This makes it more difficult, and hopefully impossible for the not-too-inured to claim more injury than what they really have. Legislation in Michigan and New York is also being explored to reduce the costs to insurance companies (that then pass the costs down to policyholders).
In order for insurance companies to make enough money to cover overhead and claims, they have to balance their risk by charging higher rates to riskier drivers and seek to hold on to the best customers who are less risky.
Medical Care
According to the Centers for Disease Control and Prevention, $17 billion was the amount paid out to people who were injured in car accidents in 2010. Include productivity loss with
that and the cost is closer to $100 billion.
The amount that a policyholder is covered for is entirely dependent on the amounts of coverage he or she
chooses when the policy is set up. All states that require auto liability insurance have a minimum amount that he or she can buy, but the policyholder can choose much higher levels of coverage for better financial protection. For example, in Ohio, the minimum requirement is $12,500 each person and $25,000 total each accident for injury. As one can imagine, this amount can quickly be depleted causing more money to come out of one’s bank account or paycheck to pay for the injuries.
It’s recommended in most cases that a policyholder do a minimum of $100,00 each person. If the policyholder owns a home and other property and financial holdings, it would be wise to max out coverage, which could be $1-$2 million.
Legal Fees
Many policyholders might not even consider this, but anytime there has to be a hearing, appeal, or litigation in regards to an accident, those costs are in addition to any medical and damage costs. Depending on the region in which the attorney resides, the average hourly cost for an attorney could be anywhere from $150 to over $1000. High-profile attorneys in metropolitan areas can charge as much as $1250.
Damage
One might think that the cost for damage is low since to fix a car might only be a few thousand dollars. However, imagine if there were
three or four vehicles involved, newer cars, and luxury cars or commercial trucks that cost far more money to replace.
In addition, any losses to other property must be considered: Buildings, fences, structures, poles, and landscaping add up pretty quickly.
How does this relate to you and your insurance policy? First of all, the insurance company looks at the risk of your entire region to see how likely claims occur and the cost of those claims to factor into your own personal auto insurance premium. Then any past claims will be considered as for how much risk you personally are to the company.
If you have a small, one-car accident and the cost to fix your property is something you can finance, it is far better to go ahead and finance the cost and leave the insurance company out of it. This will reduce the increase you can expect with later premiums that increase, often as much as 30-40%.
Finally, you should not “pad” any bodily injury or medical claims in accidents you are involved. This makes you part of the problem rather than part of the solution.
