Calculator
Example data table
| Scenario | Annual premium | Surcharge | Duration | Fee/year | Accident 1 probability | Accident 2 conditional |
|---|---|---|---|---|---|---|
| Urban commuter | 1,450.00 | 35% | 3 years | 85.00 | 18% | 30% |
| Family vehicle | 1,150.00 | 25% | 3 years | 60.00 | 12% | 20% |
| Low mileage driver | 900.00 | 20% | 2 years | 45.00 | 8% | 15% |
Formula used
Baset = CurrentPremium × CoverageFactor × (1 + Inflation)(t−1)
IncreaseNot = p₁ × (S₁t + D₁t) + p₂ × (S₂t + D₂t)
Costt = Baset × (1 + Increaset) + Feet + AdminFeeExpectedt
PV(Costt) = Costt / (1 + DiscountRate)(t−1)
How to use this calculator
- Enter your current annual premium and term length.
- Choose probability mode and set accident timing.
- Add surcharge and claim-free discount loss impacts.
- Enter the forgiveness fee and eligibility waiting period.
- Optional: add caps, admin fees, and a second accident.
- Submit to view savings, tables, and both charts.
Why accident forgiveness changes expected premium cost
A single at-fault accident can trigger a surcharge and remove claim-free discounts for multiple renewal cycles. This calculator estimates the expected impact across your selected term by combining premium growth, accident probability, and timing. For example, with a 1,200 annual premium, a 30% surcharge lasting 3 years, and a 15% term accident probability, the surcharge component alone adds roughly 54 in expected annual cost during the surcharge window, before inflation and coverage factor adjustments.
Inputs that materially move the savings estimate
The largest drivers are the surcharge percent, the duration, and whether the policy also protects claim-free discounts. A 10% increase in surcharge rate can shift multi-year expected cost by hundreds when your base premium is high. The eligibility waiting period is critical: if forgiveness starts after 1–2 claim-free years, an accident early in the term may not be forgiven.
Discounting, inflation, and comparing today’s value
Premiums often rise over time. The calculator applies an inflation rate to project future base premiums, then discounts results using your selected discount rate. Present value helps compare future premium dollars to today’s money. For instance, at a 6% discount rate, a 200 cost in year 4 is worth about 168 today, which can change whether the annual forgiveness fee is financially justified.
Modeling a second accident and practical risk framing
Optional second-accident modeling adds a conditional probability (given accident one) and separate impacts. This is useful when drivers expect elevated risk periods, such as a new commuter route or winter driving. The calculator treats accident two as not forgiven, which keeps the estimate conservative when benefits are limited to one forgiven incident.
Interpreting break-even and using the outputs
Break-even identifies the first year where cumulative expected savings become non-negative. If break-even is beyond your ownership horizon, paying a fee may not be efficient. Use the yearly table to see which years drive cost, then adjust accident timing, caps, and claim-free discount loss rules to match your insurer. Export CSV for audits and download the PDF for sharing with advisors.
FAQs
1) What does “expected savings” mean here?
It is the probability-weighted difference between projected costs without and with forgiveness, including fees. It is not a guaranteed refund or quote.
2) Should I use term probability or annual probability mode?
Use term probability if you already have a multi-year estimate. Use annual probability if you think about risk per year; the calculator converts it into a term probability.
3) Why is there a “claim-free discount loss” input?
Some insurers remove safe-driver discounts after an accident even if they waive the surcharge. Adding this input helps model that separate premium increase.
4) What does the eligibility waiting period do?
It delays when accident one can be forgiven. If an accident occurs before the waiting period ends, the model applies the surcharge and discount loss normally.
5) How does the surcharge cap option work?
It limits the combined expected increase component from surcharges and discount loss to your cap percent, helping approximate policies that restrict maximum premium increases.
6) Why is the second accident treated as not forgiven?
Many programs forgive only one qualifying accident. Treating a second accident as not forgiven provides a cautious estimate and highlights the value of maintaining safe driving after the first event.