Hidden Costs of Speeding Tickets

You're returning from a perfect weekend getaway, and a trooper nabs you while you're still out of state.

Do you admit guilt, drop the payment envelope in the mail, and have it be historyor do throw it in the trash and hope it just goes away?

Neither, exactly. And just to clear up some misconceptions, this is definitely not a case of, "what happens in Vegas, stays in Vegas."

If you understood the massive stakes involved, you'd do your research, maybe hire an attorney, and even if you have a clean record do your best to have the ticket reduced or, better yet, thrown out.

The days of speeding tickets simply going away, even if they're out-of-state, are long gone. And it's important you do something about it because a speeding ticket can come back to haunt you for years, in ways that you probably hadn't thought possible.

Unseen affects, budget-hemorrhaging results

Most drivers know that having speeding tickets on their record will raise their auto insurance rates, but few are aware that, depending on where they live, it can affect them in a myriad of other ways, seemingly unrelated to driving. Like when you apply to get a new life insurance policy, to insure a boat, or even to apply for a business loan.

This could mean thousands of dollars. And that's even before considering that an unsettled ticket could find its way to your credit score to wreak further havoc.

Technically, if you're a repeat speeder, you're risky business, and that risk might apply to other aspects of your life—or so say the actuaries, those who arrive at the methodology that takes all those seemingly insignificant factors in your profile, weighs them with factors like your driving record, and determines whether or not you're high risk. Simply put, whether to charge you a few hundred dollars or a couple thousand on your next insurance premium is a matter of calculated risk.

The business of risk

If you're one to argue that speeding doesn't necessarily place you at a higher risk, you're not going to find much sympathy from insurance companies. As they're in the business of risk, they raise rates because with habitual speeding comes a much greater chance of injury, property damage, or death. Excessive speed is attributed in the worst, most costly accidents. In about one third of all fatal crashes, 26 percent of injury accidents, and 15 percent of property-damage-only accidents, speed is a factor. According to the Insurance Institute for Highway Safety (IIHS), more than 1,000 Americans die every month due to speed-related crashes.

"Indeed speeding does contribute to crashes," said Anne Fleming, a spokesperson for the Insurance Institute for Highway Safety. "People would love you to believe that speeding doesn't cause more accidents, but it does."

And it's all very expensive. According to the National Highway Traffic Safety Administration, the economic cost of speed-related crashes adds up to more than $40 billion—each year.

Without question, there's an unfairness at times to the way in which motorists are singled out and ticketed for minor speeding goofs. But the system that insurers use for determining rates generally allows for that, with one minor-offense freebie not raising rates. After that, a pattern emerges with multiple offenses —- that this is a habit, not an anomaly -— and premiums rise to reflect that increased risk.

In several extensive studies of U.S. and Canadian drivers, researchers have found that the risk of a crash increases almost in direct proportion to the number of speeding tickets.

Today speeding, tomorrow a costly claim?

Especially when looking at a new applicant, insurers see moving violations as a predictor of what's to come, explained Jeffrey Spring, public relations manager for the Automobile Club of Southern California. Spring added that, simply put, "speeding today is a predictor of a crash tomorrow."

Though at first you might think of life insurance as something completely unrelated, driving is a significant factor in mortality risk for those middle age and younger. In addition to having you fill out an extensive questionnaire and gauging how healthy you are, life insurance companies might check your driving record, with your approval, at the time that you open a new policy—and potentially again if you up your coverage or make significant changes—but the chances that the life-insurance company will periodically check your record are relatively low, according to Pete Moraga, of the Insurance Information Network of California.

Dick Luedke, a spokesman for State Farm, says that two or three tickets are unlikely to have a serious impact on life insurance even if they know, but a more serious offense like driving under the influence will. It's a matter of knowing the risk, Ludke says, and "the cost of making a promise" for insurers to cover the insured in the event of an accident or issue.

But it's in the interest of your auto insurer to keep a close eye on your driving; don't think that they won't find out.

"An insurance company can check your record anytime and does not need to inform you that they are checking," said Loretta Worters, vice president of the Insurance Information Institute (III). According to Worters, the most common times are when you initially apply, when you change coverage or your policy, or once every couple of renewal cycles. Some carriers use a method of randomly spot-checking records, so you never know when that "forgotten" ticket might influence your premiums after all.

Your credit score might also be used in part to determine your rate for various types of insurance, including auto coverage. That's not out of line, as "credit is tremendously correlated with risk," said AAA's Ludke. Studies have closely linked credit-based insurance scores with the likelihood of insurance losses in auto and homeowner coverage. Credit is an "extremely powerful, objective, and accurate" predictor of insured losses," according to the III's Worters, who added, "Consumers with low credit scores submit more claims than those with high credit scores."

However you can rest assured that provided you pay any fines on time your speeding tickets won't find their way onto your credit report. Traffic violations aren't a factor in credit, and your driving record itself isn't consulted when calculating your score, assured a spokesman for Experian, one of the major credit-scoring companies.

California and Hawaii don't allow personal credit ratings from factoring into auto insurance coverage, but in most other states (basically wherever it's not explicitly restricted) it's now common practice to run a credit check for any type of insurance.

Credit where credit is due

But don't assume anything. Depending on what state you're in, the insurance company might also be able to see (and use in calculating your premium)—in addition to your credit history—results of civil lawsuits, settlements, and foreclosures for a longer time than other items on your credit report. And in most states, your claims history, where you live, marital status, occupation, education, and all sorts of other factors can have an impact on your rates—or even how severe the impact might be from a ticket.

Strictly speaking, it's usually not the end of the world if you get a minor speeding ticket on your record. But a second minor ticket is likely to rise rates about 20 percent. By the time you get to the third minor ticket, or one or two weightier offenses, your rates will skyrocket. Once you have three to four tickets or more, you'll find yourself kicked into a so-called distributed risk pool, in which larger insurers share the risk of the worst drivers and habitual offenders—paying several times more for only basic coverage that the law requires.

Before you even think again about delaying payment on that ticket, keep in mind that the ticket alone could taint your credit score. If you simply contest a ticket and request a court appearance, a speeding ticket can be reduced (often in fine amount, sometimes in the charge). But if you ignore it completely, you're setting yourself up for a double-whammy. If the ticket gets sent to a collection agency for nonpayment, the next time you go to apply for a new policy or change coverage you'll not only have a lower credit score but blemishes on your driving record—the perfect storm for a big jump in your premium.

So if you get a speeding ticket, don't throw it in the trash and try to forget about it; but don't simply admit guilt and pay it either. Contesting the ticket at least buys you the chance to get out of it. Even if you got the ticket while driving out of state, you'll be better off finding a local traffic attorney to take your case, especially if it's in an adjacent state. And be willing to take a safe-driving or defensive-driving course, which might erase the ticket from your record or at the very least indicate to insurers that you're working to reduce your risk.

A little damage control will go a long way to help cushion the impact.