How the Demerit Point System Affects Car Insurance Rates

The point system in traffic parlance refers to the assignment of "points" or values to each infraction you incur. Car insurance companies evaluate the points instead of each infraction when they calculate insurance rates. The insurance companies therefore have a system that may or may not be the same as your state DMV's points system.

Since car insurance companies have their own methods for calculating your rates after you've had accidents and violations, not every company will penalize you the same. If you've recently seen your rate increase after an accident or violation, you can still compare car insurance quotes for a cheaper rate.

Every traffic infraction for which you’re found “guilty” – such as at-fault accidents or driving under the influence – can be assigned a certain point value if your state has a point system in place. Some tickets, such as a parking ticket, typically do not have points associated with them.

For example, a company may use this type of system:

How Demerit Points are Assigned
Description Points:
First Occurence
Points: Second Occurence Points:
Each Additional Occurence
At-Fault Crash 2 3 2
Not-At-Fault Crash 0 0 0
Driving Under the Influence 1 2 3
No-Charge Violation 0 0 0
Major Violation 4 4 4
Minor Violation 2 1 1
Speeding 3 2 2

Some companies’ rating algorithms are complicated, and some are simple. Most of the algorithms used try to put an insurance point value on each infraction or ticket (regardless of the state driving record point system). Based upon that point value, a different rating factor is use to either raise or lower the rate.

The more points you have on your driving record, the worse your record looks to a car insurance company. But because each car insurer has its own method of evaluating applicants, the points on your driving record will impact the rates you pay for insurance differently. However, it's safe to assume that the more points you have, the more you'll pay.

This article is adapted with approval from carinsurance.com: http://www.carinsurance.com/how-do-points-affect-insurance-rates.aspx


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