Credit: Shutterstock photoYou're speeding down the highway, next thing you hear is sirens go off, and your heart sinks. You calm down after the initial shock of being pulled over; only to then realize your auto insurance is about to get more expensive. Before you get too panicked however, there are some factors you should consider first. Below we discuss what they are and if they may or may not cause your rates to skyrocket.
What is Considered a Traffic Violation?
This may seem like an obvious question, but not all violations are considered equal in the eyes of your insurance company. According to the Alabama GEICO insurance manual, the same which is used to determine premiums, there is a clear distinction between "major" and "minor" violations. Major violations include offenses such as reckless driving, hit and run, DUI, driving with a suspended license, racing, and manslaughter. Minor violations include failure to obey a signal or sign, failure to use your lights, and improper passing. Speeding is in its own category where they classify its severity based on how fast you were going, for example, going 20 MPH over the speed limit, or any speed over 85 MPH is considered more major than a speeding violation under those parameters. This may only apply in some states however, and instead may be treated entirely as a minor offense, regardless of speed, so long as no one was injured or killed in the incident.
When Should You be Worried About Your Rates?
The answer to that question really depends on who you are. A major violation, such as reckless driving, is very worrisome. We found in a study across three states that a reckless driving offense raised rates by 2.2x, meaning a $1,000 rate becomes $2,200. In that same study we found rates increased by an average of 1.33x for violations, regardless of speed, and some states and even some companies do not discriminate between speeds at which the violation occurred. Interestingly, even a mundane violation such as failing to observe a signal or sign saw rates increase as well by 1.33x.
These numbers however were based on a 30 year-old single male who drives a Toyota Corolla. Other factors include how many violations you have had in the past, how recent they are, your age, and even your insurance company. There can be two identical drivers, but if one of them had a violation 11 months ago, and the other 35 months ago, the former could be paying 9% more on his or her collision insurance. For young drivers, as in those under the age of 18, the rate hike is about 0.5% more expensive than the 30 year old for liability insurance premiums. On the other hand, it is 9% more expensive for a 30 year old than someone who is 74 years old.
The company you hold your policy with is also important. In our study, we looked at rates from Farmers, Allstate and Nationwide and found for our sample driver that Farmers was the most lenient when it came to rate increases after these types of violations. The average rate hike for a speeding ticket was 8% less than our overall average while it was 38% less than our overall average for reckless driving. Allstate raised rates the most after a speeding ticket, by about 1.38x. Nationwide was the worse for reckless driving offenses, raising rates 3.1x.
So should you be worried? Well, if you are a applying for a policy with a minor violation that happened three years ago, you may barely see your rates increase. If however, you are consistently racking up violations, even if they are just minor, and you happen to be a young driver, expect your rates to go soaring.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
