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The DMV Point System and its Affects on Insurance Rates

Car insurance companies take various factors into account when determining the degree of risk a driver poses. The higher the risk, the higher your insurance premium will be. One such factor, accruing points on your license for committing certain infractions. This red flag is likely to have a substantial impact on your insurance rates.

How Much Will My Rates Increase?

There is no simple answer when it comes to how much your insurance rates will go up. Each insurance company has its own algorithm for calculating premiums and the extent to which negative factors, like points, affect your rates varies widely. The state insurance department collects this data from the insurance companies and makes it available to the public, though the formulas may be quite complex.

According to Carinsurance.com, major violations could result in up to a 26 percent increase in your premium. As years pass without incident, the impact of the points on your insurance rates may decrease. Some companies may make an allowance for a certain number of points during a set time frame before imposing a rate increase. Because of the highly individualized nature of calculating insurance premiums, you should talk to your insurance company for the most accurate information regarding your individual circumstances.

Reducing Points

Taking defensive driver courses or driver improvement programs may allow you to reduce the number of points on your license. However, this may not be an option every time you commit a violation. In New Jersey for example, you can deduct two points every five years for a driver defense course or three points every two years for a driver improvement course. Your state may or may not notify you of eligibility for these types of program so be sure to check with the appropriate agency after receiving a ticket. In instances such as a first time violation, the state may avoid placing points on your record in exchange for a potentially hefty one-time surcharge.

Over time, points will be removed from your record but how this works exactly varies from state to state. In California for example, all one-point violations are removed from your driving record within three years. In New Jersey, if you go one year without any further points or suspensions, you qualify for a three-point reduction.

Other Financial Considerations

If increased financial responsibility is of concern to you, be aware that besides potentially higher insurance premiums, the state may impose a separate surcharge. Again, this will vary by state. Texas for example, begins applying a surcharge once you have accumulated six points over a three-year period. They charge 100 dollars plus 25 dollars for each additional point every year that you have at least six points on your record.