Is Accident Forgiveness Worth the Extra Money for the Coverage?

By Miranda Marquit, on March 2, 2010

When it comes to insurance, it’s all about reducing risks. The whole point of insurance is to help you hedge against the risk that unexpected events could financially devastate you — or at least cost you a great deal more than you would like to pay. If you have an auto insurance policy, you might find that it offers another risk-reducing feature: Accident Forgiveness.

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What is Accident Forgiveness?

Accident Forgiveness is a feature on some auto insurance policies that allows you to have an at-fault accident without experiencing a premium increase. Some policies will even let you have more than one at-fault accidents without a premium increase. Since it is common practice to hike insurance premiums by up to 40% after an at-fault accident, this auto policy feature can seem like a good idea to help you save money in the long term.

However, as you might guess, this sort feature does come with a cost. Most insurance companies aren’t just going to give you a free pass if you become a higher risk to them. Adding Accident Forgiveness to your auto insurance policy is probably going to cost you a little more up front. You’ll see a premium increase anyway, although it might be lower than the increase you’d get if you actually caused an accident.

Realize, too, that not everyone is eligible for Accident Forgiveness. There might be a requirement to be a customer for a minimum amount of time before accessing the feature. In some cases, you have to show a driving record free of moving violations and accidents for a certain number of years, usually three or five. You will need to find out what sorts of restrictions are on the Accident Forgiveness feature as well, if you are considering adding it to your policy. You might be surprised at what you find.

Who Can Benefit from Accident Forgiveness?

Due to costs and restrictions, Accident Forgiveness isn’t for everyone. Indeed, if you have a good driving record, and you are a careful driver, not likely to be at-fault for an accident, you might find that Accident Forgiveness is unnecessary. Compare the costs of policies with Accident Forgiveness against a standard policy. If you have a clean record, and are unlikely to run into issues that will affect your policy in the near future, it may not be worth the cost to pay for feature.

On the other hand, if your insurance premium is already somewhat high due to problems in the past, it may be worth it to switch to a new policy with Accident Forgiveness (if you meet eligibility requirements, of course). Another consideration is who might be driving soon. Some parents get Accident Forgiveness as their teenage children begin to drive. Before you sign up, though, it is a good idea to speak with your insurance agent. In some cases, there is de facto Accident Forgiveness due to your paying an elevated rate because of the increased risk associated with teen drivers. Before signing up for Accident Forgiveness, find out what sort of premium increase is expected for the first no-fault accident your teen gets into. Then compare costs based on that.

In the end, it’s up to you to run the numbers and see whether or not Accident Forgiveness is for you. Shop around, compare policy costs and consider consulting a professional who can help you figure things out.

Miranda is a professional personal finance journalist. She is a contributor for several personal finance web sites. Her work has been mentioned in and linked to from, USA Today, The Huffington Post, The San Francisco Chronicle, The New York Times, The Wall Street Journal, and other publications. She also has her own personal finance blog: Planting Money Seeds.

Add Your Question or Comment (4 Comments)

1. Ray:

   March 2, 2010 at 1:25 pm

   If you qualify for accident forgiveness I do not see any reason not to have it. Yes it will cost you a few dollars but an accident will cost you a few hundred and maybe thousands extra.
2. Kevin K.:

   March 3, 2010 at 3:11 am

   Why not? Take the accident protection… life is unpredictable, maybe you get into a crash. It’s surely going to save a bunch of money.
3. Miranda:

   March 3, 2010 at 10:26 am

   I think it depends on your needs. We’re very defensive drivers, and we have a low premium. We talked to our insurance agent, and if we got in one accident, that was our fault, we would see an increase that amounts to less than if we paid for accident forgiveness for a couple of years. It’s all about the cost-benefit.
4. Single Guy Money:

   March 6, 2010 at 9:22 pm

   If you are a good driver, I personally don’t think it’s worth it. I had one of those policies but once I shopped around, I was able to find the exact same coverage with the #1 insurer in the country for much less. I was paying almost 3 times more than I had to for “accident forgiveness”.