How accidents affect your auto insurance premiums

An auto accident is scary enough on its own; a bigger fright can come later, when you get socked with a big jump in auto insurance premiums.

Practices vary, but typically your premium will rise by a specific percentage for each chargeable claim -- ones the insurer considers primarily your fault.

Depending on the insurer, at-fault accidents can remain on your record for six to 48 months and could mean that you are paying a higher premium during that time, says Madelyn H. Flannagan, vice president for education and research at the Independent Insurance Agents and Brokers of America, Inc., a trade group.

Worse, if you have three or more at-fault accidents or moving violations within a 24-36 month period, your company may choose not to renew your insurance policy.

Penalties vary, but here's what happens at State Farm: At one extreme, if you've gone at least 10 years without a chargeable claim there's absolutely no effect on your premium, according to spokesman Dick Leudke.

If you have an accident within the first year of your policy, you can assume you'll pay a higher premium when it comes time to renew. Leudke says the cost of liability insurance, which typically represents 40% of a premium, will go up, as will the cost of personal injury coverage and collision, which covers the damage to your car.

The first accident, the cost of all three types of coverage go up 10%; the second time another 30%, and the third time an additional 50%. So after the third accident the cumulative increase in the cost of liability, personal injury and collision insurance will be 90%.

To completely go away you'd have to go 10 years without another chargeable claim, although some would come down after eight years.

Allison Bisbey Colter is a freelance writer in New Jersey whose work has appeared in The Wall Street Journal and American Banker. She is a former editor at TheStreet.com and a former reporter for Dow Jones Newswires.