Posted on: Sunday, April 11, 2004

Consider insurance rates before stepping on gas

By Sandra Block
USA Today

Admit it: Even if you're an otherwise safe driver, you don't always observe the posted speed limit. Maybe you're late for work, or "Born to Run" is playing on the radio. Or maybe you drive fast because your car has a big engine and speeding is fun.

Well, here's one reason you may want to lighten up on the accelerator: A speeding ticket could significantly increase your car insurance premiums. Even a first-time citation could boost your premiums by more than 25 percent, insurance company officials say.

That may not seem fair, considering that most drivers occasionally speed. A recent analysis by USA Today found that Americans are driving faster than ever, even though highway speed limits are higher than a decade ago.

But the everyone-is-doing-it argument doesn't hold much water in the insurance business. Industry officials say a driver who receives a speeding ticket has a greater statistical likelihood of getting involved in an accident.

Numerous studies by highway safety experts show that "the faster you go, the more deadly it is," says Jeanne Salvatore, spokeswoman for the Insurance Information Institute, an industry trade group.

If you're cited for speeding, your insurer may tack a temporary surcharge on your policy for three years. At Nationwide Mutual Insurance, the surcharge may raise your rate by up to 26 percent the first year, says Kevin Craiglow, spokesman for the company.

The surcharge will gradually decline and disappear after three years, as long as you've maintained a clean driving record, Craiglow says.

The size and duration of the increase varies greatly, depending on several factors, including:

• Your driving record and your relationship with the insurance company. Some insurers waive the surcharge if the customer has a clean driving history and a long-term relationship with the insurance company, Salvatore says.

• Where you live. Insurance is regulated by the states, which have different laws regarding rate increases, says Tom Hollyer, product development manager for Progressive. The laws can have a significant impact on how a speeding ticket affects your insurance rates.

Some states don't allow insurers to impose a surcharge for first-time speeding tickets, while others require insurers to raise rates for some speeding violations.

An analysis by Progressive illustrates how where you live can affect your rates. A single male driver who lives in Phoenix and receives one speeding ticket will get hit with an average rate increase of 16 percent, compared with no increase if he lives in Philadelphia, Progressive says.

• How fast you were driving. The USA Today analysis found that 10 percent of ticketed drivers in 2002 were "extreme speeders" — drivers who exceeded 90 mph, or 15 mph above any speed limit. But racers beware: If you're caught, your insurance surcharge will be much higher.

The cost of speeding isn't limited to your car insurance. Other insurance companies may also look at your driving record when deciding whether you're a high-risk customer. If you have a rap sheet for speeding, you could end up paying more for life insurance, health, disability or long-term-care insurance.