Sometimes it’s obvious when you need to file an insurance claim.
If there’s a lot of damage, or if someone’s been hurt, the costs involve mean filing an insurance claim is a no-brainer.
But what about all those other times, like when you accidentally back up into a tree, or if it’s just a minor fender-bender?
If the accident involves anyone else — or anyone else’s property — at all, it’s better to notify your insurance company than keep mute. But if the accident only involves your own property, things get a little murkier.
We’ll go over the things you need to consider when deciding whether to file a car insurance claim vs. pay out of pocket. That way, you can feel confident you made the right decision.
When to file an insurance claim
Luckily, there are a few cases where it’s clear you should file a claim.
If you get in a car accident where someone else or someone else’s property is involved, it’s always a good idea to file a claim. Even if the damage seems minor and/or the person is unhurt, it’s best to notify your insurance.
Here’s why: when the accident happens, you don’t have the full facts on the damage. Sure, it might not look so bad on the outside, but it’s possible that something major in the engine came loose and could cause havoc after a person drives away, or any number of other problems.
Even more insidious are internal bodily injuries and problems like whiplash, which might not show up for several days after the accident. Injuries like this can cause permanent damage and cost hundreds of thousands of dollars.
If you haven’t documented the accident with a police report and insurance claim, your insurer could deny your claim when you come to them later, or that the other person involved could sue you.
So if you agree to a handshake deal and slip a few hundred dollar bills between you before parting ways, you’re potentially opening yourself up to major expenses down the line.
Your insurer might come back to you and say the claim isn’t worth processing because the damage isn’t great enough, especially if it’s something minor. But even if that’s the case, at least you’ve gotten it down on the record so you’re safe in the future.
When to pay out of pocket
If the accident only involves your own car and your own property, things aren’t so cut-and-dry. Whether you file a claim or not is your choice, but here are five factors to consider, in order:
1. Do you have collision insurance, comprehensive insurance, or personal injury protection (PIP) insurance?
If you’re involved in an accident with another driver, it’s easy enough to file a claim to cover damage or injuries. But what if there’s no other person involved?
In this case, there are a few other insurance policies that might cover you:
- Collision insurance covers damage to your vehicle if you’re in an accident, such as if you back up into a light post.
- Comprehensive insurance will cover you against other types of damage to your car, such as a rogue hailstorm or vehicle theft.
- Personal injury protection (PIP) covers your medical bills if you hurt yourself while driving or if you miss wages as a result of your own accident.
If you have these types of insurance policies, you can consider whether or not it’d be worth filing a claim. But if you don’t, then you don’t need to worry about it: you can’t file a claim because you don’t have this kind of insurance.
2. Is the damage less than the deductible amount?
The next thing to consider is how much the damage will cost to repair. You may need to take the car to a mechanic to get an estimate for this, or look up a rough estimate online for common things like fender-benders or snapped-off mirrors.
If it’ll cost less than your deductible to fix the damage, you don’t need to file a claim because insurance won’t cover the damage. For example, if you did $350 worth of damage and your insurance has a $1,500 deductible, you wouldn’t have reached the level at which insurance starts kicking in anyways.
But if the damage is higher than your deductible amount, it may still be worth filing a claim.
3. Does your insurer have an accident forgiveness policy?
The next thing to consider is whether your insurance has an accident forgiveness policy. This means you get one free “get-out-of-jail” card in which you can file a claim and not be penalized for it with a premium rate hike.
However, accident forgiveness only applies to your first at-fault accident. If you get into an accident after using the policy, you may see an increase in your premiums. But it depends on your insurance company. Some insurers have an upgraded form of the policy that covers multiple accidents.
Even if you have accident forgiveness as part of your car insurance policy, any accidents you’re at-fault for will still be on your driving record and will stay there typically for the next three to five years.
4. How big is your emergency fund?
If you have enough money to cover the cost of the repairs out of pocket, consider how much it could save you to just pay for the damage yourself vs. filing a claim.
If the cost for repairs is minor (but still above your deductible amount), you may be able to save money in the long run by paying for it out of pocket and not risking a rate increase.
For example, let’s say you had a $2,500 deductible and the cost to cover the damage was $2,750. In this case, you’d only get a $250 payout. But you may pay much more than that over time in the form of a rate hike.
You can call your insurer to ask what your new rate may be to help you decide if it’s worth it or not.
5. How long has it been since your last insurance claim or traffic violation?
Filing too many insurance claims and/or getting too many tickets in a short time span can boost your premiums even higher. It may even cause your insurer to drop you when your policy expires.
If it’s been more than three to five years since your last insurance claim or a speeding ticket, you’re probably relatively safe from being kicked off your insurance plan or seeing a drastic rate hike. Each insurer is different and this is only a general guideline, however.
If you do decide to file a claim and see a rate hike, it’s always worth checking your rate with other insurers. It’s a good idea to shop around even if your policy isn’t up. It could potentially help you save money. You might find a much cheaper rate with another company despite the insurance claims you’ve made in the past.