How Do Points Affect Your Auto Insurance Rate?

For the most part, the motor vehicle administrations located statewide throughout the United States have “point systems” which are used to track accidents and violations that impact your driving record. This point system is especially pertinent when one is looking to purchase car insurance. Car insurance companies will order a copy of the applicant’s driving license record to determine what rates to charge. The higher the amount of points you have accumulated, the higher the premium.

This topic becomes a bit confusing when one tries to decipher between the individual state driving record point system and the insurance company’s point system. Every state decides how many points to assign to various infractions committed and over what time period a driver can be held accountable as well as how severe action taken may be. These points are sometimes referred to as demerit points. Each state also sets rules pertaining to how long points stay on one’s driving record and how long an auto insurance company can use such points to determine premiums.

State Point Values

There is no standard point value by state for any one offense. Some states permit certain violations, such as DUIs (Driving Under the Influence) to remain on your record far longer than a speeding ticket. For example, Oregon counts all convictions and avoidable accidents regardless of severity as a single occurrence with no additional points for major infractions while Wisconsin has a point ranking system by severity: minor violations are awarded two points while the most serious infraction is awarded six points. Such information can generally be found on the website of your state’s DMV.

In addition to the unique point system of your particular state, every insurance company has its own method of evaluating car insurance applicants. As it pertains to insurance, it is safe to assume that the more points you have accumulated on your driving record, the higher your insurance premium may be. Because each insurance company has a complex rating algorithm, it is virtually impossible to compare. Typically, you can expect the rating algorithm to put an insurance point value to each infraction (as shown below).

Description
Points (1st Occurrence)
Points (2nd Occurrence)
Points (Additional Occurrences)
At-Fault Accident232
DUI123
No Charge Violation000
Major Violation444
Minor Violation211
Not-At-Fault Accident000
Speeding322

Based upon the value established by the insurance company, a different rating factor is then used to increase or decrease the rate or premium. One major violation could have the effect of increasing your premiums by 26% a year. After arriving at a score for a car insurance applicant, the insurance company feeds the insured’s information into a computer which checks through information and spits out an answer. Often, the mathematical algorithms used to arrive at this answer are too complicated for the average insurance representative to discuss, but all should have underwriting guidelines along with any rating change guidelines to help explain.

Similarities among the rating methods include looking at an applicant’s accidents, traffic violations and claims (comprehensive or liability claims). Some insurance companies look at 3 years, some look at 5 years while others look at 7 years. Most look at incidents incurred by any driver that will be covered by the policy during the preceding three (3) year period. Persons that share characteristics with a group having high claims experience are charged more than if associated with a group having lower claim experience.

How Points Affect Your Insurance Premium

To understand in simpler terms, insurance companies base their rates on the risk factors associated with the applicant. Therefore, even if someone rear ends you at a stop light and you deem yourself not to be at fault, if you have had a speeding ticket or other violation prior to this accident, you might be considered an at risk driver. The number of accidents you are in directly affects your premium. You could be in four no-fault accidents, and you could still see an increase in your premiums. The insurance company’s justification: even though the authorities determined these accidents not to be your fault, something must be wrong with your driving if you were involved in so many crashes. Insurance companies may also worry that insurance fraud is playing a role in this equation. It is not unheard of for people to orchestrate accidents to reap settlements from insurance companies. This is why a high number of no-fault accidents could cause insurance companies to be suspicious.

Depending on where you live, you may be able to remove points by attending traffic school. There is normally a limit as to how far back insurance companies can look at your driving record for rating purposes; three to five years is typical.  Thankfully, in my 10 or so years of driving, I’ve never accumulated a point on my license, so my ridiculously high car insurance premium is actually lower than it could be.

The best way to keep points from accumulating on your driving record, thereby raising your car insurance premiums, is to drive safely and obey the law. Unfortunately, you can be the world’s safest driver and still face high rates, as your driving record is not the only component of your application being scrutinized: the year, make and model of the car as well as your credit history/score will also be considered.

Published or Updated: August 8, 2011

Comments

  1. Charles says:

    my fiance recently totalled her car along with two others. She was under her parents insurance but after we got her a new car, we put her under my insurance. I expected the rates to be much higher, but we were still able to get a very good rate for our premium. Perhaps the accident claim wasn’t accounted for under my insurance company. I’m crossing my fingers that after 6 months when the premium expires, that the rates won’t shoot up too much.

    • I understand your concern Charles, but be careful, if the previous insurance company had yet to report the claim to Lexus Nexus or ChoicePoint (companies that insurance companies use to research your claim history) you may see a major rate hike at the end of six months when that accident does show up. Also be aware that your insurance company charges based on CONVICTION date (the day you paid the fine) for tickets, but does follow the INCIDENT date (the day it actually happened) for accidents, and at least in NY they can charge for 3 years and three months from those dates. Good Luck, hopefully your finace is getting a “freebie” for this accident as it is hopefully her first!

  2. hgstern says:

    Cavalcade of Risk #138 is up, and your post is in it:

    http://insurancecoveragemassachusetts.blogspot.com/2011/08/welcome-to-cavalcade-of-risk.html

    Please tell your readers.

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