Your car insurance provider frequently tells you to report even the most minor car accident. Contrary to these instructions, sometimes it’s best not to file an insurance claim.
A few years ago, I was in a minor fender bender with another car. I admit it: the accident was definitely my fault. But the damage was minor, and I thought I could afford the repairs out of pocket. I exchanged insurance information with the other driver, but he agreed not to report the incidence to his insurance company.
About a week later, I paid to repair the dent in his driver’s side door. I didn’t have to deal with an insurance agent, and I guaranteed that my insurance premium wasn’t raised. My accident represents just one circumstance where it might be smarter, easier, and, in the long term, cheaper not to file a claim. Let’s first look at why your auto insurance rates could increase due to a car accident. Then we can try to sort out when not to file a claim.
What might increase your insurance rates?
Filing a claim might get you off the hook for paying for that single incident, but it likely will negatively impact your insurance rates, which can cost you dearly down the road. Insurance companies use complex calculations to determine the rates you pay. These are not entirely understood. But we do know of several actions that are generally known to lead to higher insurance rates or even losing your insurance policy altogether.
If you file too many claims—or even the wrong kind of claim—your premium could go up or coverage might even be dropped.
One claim is unlikely to affect your premium, but multiple claims will almost certainly cost you, particularly if you have other driving infractions on your record. Consulting with your insurer about whether or not to file a claim can also lead to increased rates. Though he might seem like a nice fellow on the telephone, your insurance agent is not necessarily a trusty advisor. Some agents are obligated to report you to the company if you even discuss a potential claim.
A car accident can be an emotionally taxing experience. In its immediate aftermath, the tendency is to call your insurance company and have them sort out the mess. Insurance companies try to promote this behavior by specifying that they don’t have to cover your accident if it’s not reported promptly. Most car policies have this stipulation.
Although filing an insurance claim is often the right decision, it’s important to remember that there is no law that requires you to tell your insurer about a car accident. As previously noted, any dealing with your insurance company can cost you money—even when you’re not at fault in an accident or don’t intend to file a claim.
When NOT to file a claim
Unfortunately, there’s no easy formula to determine whether or not to file an insurance claim. The best approach might be to remember what purpose insurance serves—it is meant to provide protection against unaffordable, crippling costs. That means even if you pay your insurance premiums regularly and on time, you should probably not instantly turn to your insurer following an accident.
- If you’re in a single-car accident that involves less than $1,000 in damage, you might be better off not filing a claim. For instance, if you back into a pole and the only damage is to your vehicle, you might want to pay for the repairs yourself and avoid facing possible insurance rate hikes.
- If you’re at fault in an accident with another car, and the damage is less than $1,000, you might want to try to convince the other driver not to report the incident to his insurer. It is required by law to exchange insurance information after an accident. But if you could pay for his car repairs out of pocket or even with a credit card, it might save you money in the long run by keeping your premium costs down. You will want the other driver to get a repair estimate fairly quickly. Estimating repair costs can be tricky, and you want to be able to file a claim within the designated time period if you underestimated the repair costs.
- If you’re involved in an accident and the other driver is at fault, you face a trickier situation. If you trust that the other driver will pay for your auto repairs, you might consider not filing a claim. Remember, even if you are not at fault in an accident, filing a claim can raise your insurance costs.
When to file a claim
There are some incidents where it might be quite risky not to file a claim. If the other driver suffered an injury in the accident, you should always file a claim. Likely, you won’t have a choice in the matter since the other driver will almost definitely insist on telling his insurer. If you or your passenger suffered an injury, you probably should file a claim as well. Medical costs associated with car accidents can be unpredictable and can quickly get out of hand.
Filing a claim can result in rate hikes between 20-40%. To save yourself from years of increased costs after a car accident, be sure to give serious thought to whether filing a claim is the right decision.
Published or updated March 22, 2013.