The answer to this question depends upon the company, and depends upon whether the accident was at-fault or not.
Some insurers will increase your auto insurance premium after a certain number of not-at-fault accidents over a specified dollar amount. The insurers do this through a rating mechanism called “Tier Rating”. Usually you will not be rated in a higher tier simply because of one not-at-fault accident. A typical tier rating rule might read something like: “two or more not-at-fault accidents where each accident caused a claim payment in excess of $500″ rate the vehicle in the sub-standard tier. Yiost, but not all, insurers will rate a driver in a higher rated tier after one at-fault accident.
See Post 5 for the discussion of how insurance companies determine the premium you pay for auto insurance and Post 6 for the discussion on Tier Rating.

Do all insurance companies have the same number of Tiers?

No. Some insurance companies have only one tier. Some may have as many as 14. This is just one reason why it’s important to shop around. Smart insurance buyers will shop many companies to choose the tiers and coverages that are best for them, and get into the best tier that they can. Remember different companies have different criteria for their tiers.

How do I know what tier I belong in?

Auto insurance companies in New Jersey are required to send you documentation that explains how your policy is rated. This will include a section on Tier Rating. The documentation is usually called a “Rating Information Form”.
If you still can’t determine what tier you belong in, don’t hesitate to call your agent, broker or your insurance company directly to get an explanation.

What do I do if I don’t agree with the Insurance Company’s explanation?

If you think that you have been placed in a wrong tier, or that your policy has otherwise been incorrectly rated, you can file a complaint with the Department of Banking and Insurance.

Compulsory insurance means that there are certain car insurance coverages required by law. In New Jersey, for a Standard Auto Policy the required Coverages are: Bodily Injury and Property Damage Liability (sometimes called a Combined Single Limit), Personal Injury Protection, and Uninsured/Underinsured Motorists coverage. For a Basic Policy, the only required coverages are Property Damage Liability and Personal Injury Protection coverage.

So I need Personal Injury Protection coverage even if I’m covered through my health plan at work?
Yes, but in many cases, you can choose to have your health provider provide primary Personal Injury Protection coverage in return for a reduced premium.

What are optional coverages?

Optional coverages are those coverages offered by an insurance company that are not compulsory. The most common of these coverages are Comprehensive (sometimes called “Other Than Collision”) and Collision coverage.

Speaking of Comprehensive and Collision coverage, how come my Comprehensive and Collision premium charges don’t detrease as my car gets older? The car is worth less each year, isn’t it?

Yes, it’s true that your car is usually going to be worth less with each passing year. However, keep in mind the actual cash value of the car is paid by the insurance company only on “total’i losses. This is typically after a severe accident or the total theft of a vehicle, which is a very small amount of the total number of comprehensive and collision claims.

Most of Comprehensive and Collision claims are for partial losses, where the insurer reimburses you or pays the body shop directly to perform repairs on the vehicle. The cost to perform these repairs increases every year. Remember, a repair shop’s hourly labor rate goes up pretty much every year. Since this affects the vast majority of comprehensive and collision claims, the premium charges for these coverages do not automatically decrease.