This Common Mistake Can Cost You 40% On Your Car Insurance

Whether you're hitting the road on a holiday weekend or logging miles commuting to and from work, be sure to pay close attention to the posted speed limit signs. Otherwise, a rear view mirror filled with flashing red and blue headlights could lead to more than having to dig out your license and registration. 

Get handed a ticket for speeding, and you won't just have to shell out a few hundred dollars for fines and court costs. According to data compiled by Coverhound.com, a speeding ticket can be devastating to your car insurance rates, and the effects can linger for several years after the incident.

Coverhound's data says that a driver with a clean driving history -- no accidents, claims or moving violations for at least five years -- that gets nabbed for speeding will pay dearly. In addition to the fines and fees associated with the ticket, speeding tickets drove up the rates of Coverhound's clients by a whopping 40.23% the first year following the ticket.

And those steep rates hung around. Three years later, drivers were still paying for their lead foot, forking over 21.77% more for car insurance than if they hadn't been caught speeding.

Why the steep spike in rates?

Moving violations such as failing to signal or rolling through a stop sign can make your car insurance company unhappy -- even cause a little uptick in your rates. But it's a speeding ticket, says Billy Van Jura, an insurance broker in Poughkeepsie, NY, that sends a message to your car insurance company that you're a risk.

How much driving mistakes
can cost you

Assuming a clean driving record prior to the incident, here's a look at how a few other mistakes behind the wheel can devastate your car insurance rates:

Accident with bodily injury
First year -- up 54.09%
Third year -- up 42.84%

DUI
First year -- up 94.13%
Third year -- up 63.47%

"Generally speaking, a car insurance company sees a speeder as being riskier than non-speeders. Insurance companies think those who speed could be more likely to need to file a claim and cost the insurance company money because, in theory, a person who speeds is found to be riskier overall than those who don't speed because a speeding ticket can also be part of a pattern of tickets that person has received, or will receive. And the violations committed that resulted in the ticket can contribute to or cause an accident," says Van Jura.

So to try and cover any potential loss resulting from your wild and crazy ways behind the wheel, your car insurance company will slap you with a surcharge -- a penalty premium that you'll pay on top of regular car insurance rates based on your credit score, age, gender, marital status and ZIP code.  

How much of a surcharge depends on your car insurance company, but Coverhound's data says more than 40% is average. "Some companies will surcharge a car insurance policy by 10 to 20%," says Van Jura. 

Recovering From High Rates

All is not necessarily lost if your rates are increased because of a speeding ticket.

"Your rates should absolutely return to your pre-ticket rate after the surcharge penalty period which is typically 36 months but could stretch out as far as 60 months," says Van Jura. However, there's a catch. "You will absolutely need to call and request the change back to pre-surcharge rates," says Van Jura. "This is especially true if the ticket surcharge period falls in the middle of your policy period instead of when your policy renews."

The Investing Answer: If you do accidentally space out on the speed limit and get snagged for speeding, throw yourself on the mercy of the court. You may be able to plead down the offense to a non-moving violation, which won't cause your car insurance rates to speed through the roof.

Taking a defensive driving course post-ticket could help shave off a smidge, too. Many insurance companies offer discounts of up to 10% off for completion of the course.

by Christian Hudspeth What's even better than earning rewards for spending on your credit cards? Getting paid hundreds of dollars worth in sign-up bonuses in three months or sooner -- just for tr...
by Christian Hudspeth Tired of dragging credit card debt around with you? Taking 15 minutes to transfer your debt to a credit card with generous balance transfer perks could save you thousands in...
by Christian Hudspeth If you're going to spend money anyway, then why not get paid for it?Whether you're looking for credit cards with up to 6% cash back, double flight miles, or even a free hote...
by Christian HudspethIn times where interest rates are on the rise, you may start hearing financial advisors and bankers sing the praises of an income strategy called "CD laddering" (short for ce...
Those of us familiar with selling property know real estate agents don't come cheap. With real estate agent commission and fees amounting to as much as 6% of the selling price (that's $18...
Beverly Harzog is a nationally recognized credit card expert, author, and consumer advocate. She blogs about credit cards at BeverlyHarzog.com. Being in credit card debt is the pits. I've bee...
If you haven't already felt the pressure to refinance your mortgage, you're probably really feeling it now. Mortgage rates are still hovering near historic lows. But with the economy improving...
If you or someone you know is thinking about getting a home mortgage, you may want to know about the thousands of dollars in hidden charges that some lenders are quietly adding to mortgage loans ...
by Christian Hudspeth Money market accounts (MMAs) and savings accounts make great places to set aside your emergency fund money and earn some interest income at the same time.Simply put, these s...
by Christian Hudspeth It's true that auto loans and home loans offer attractively-low annual percentage rates (APRs), while credit cards offer borrowing power without the risk of ever seeing the ...
by Christian HudspethWant to keep your emergency fund safe while earning interest yields that are three to five times higher than a typical savings account? Putting your money into an FDIC-insure...
Question: Hi there. I need your advice. I'm only 19 and I really need to start investing. Where can I start? -- Tirelo M., Gaborone, Botswana Answer: You've definitely got the right thinkin...