It’s common wisdom that one of the first steps after an accident is to get a hold of your insurance company. But are there exceptions to that rule? More importantly, what will a claim do to your insurance rate?
Sometimes, after a car accident, it’s obvious that you’ll want to get ahold of your insurance company as quickly as possible. Major damage has been done, or someone is hurt. But the truth is, not all of the 5.25 million car collisions that happen in the United States annually are serious—in fact, the vast majority of them are non-fatal. That means that tens of thousands of folks are inconvenienced on a daily basis by a minor accident. Of the 5.25 million car accidents that happen annually, most are not fatal.
Chances are, you’ve likely had someone offer to pay you out of pocket post-fender bender, or maybe you’ve even been the person begging, I mean “proposing”, to avoid getting insurance involved. People wanted to know: Is this ever a good idea? Are there some cases in which the possible rate increase might not be worth telling your insurance company about your accident over? So I thought I’d give some information on when to (and when NOT to) file a claim.
First, a few Post-Accident Reminders
- We have gone over before on what to do after a car accident, but for this post, I’ll go over a few things I always remind my clients that are critical financially after an accident.
- A couple little tips I tell my clients about filing accidents: First of all, I always suggest attempting to file a police report or an incident report, so that the other party won’t be able to come back after the fact and try to twist the truth (I’ve seen that done all too many times). Second, I tell people to never discuss the details of the accident with anyone but the police and insurance company. It’s up to the police and insurance adjustors to determine the fault of the accident, not you. I have heard of too many people saying, “Wow, I’m so sorry, I didn’t mean to do X…”.
- Sound advice: Get the police and your insurance involved, and keep your mouth shut. But, I want to add, this isn’t always necessary, depending on the accident.
- …And One Giant Disclaimer
I always tells my clients the same thing: Check your insurance policy documents. Many insurance policies state that you must notify the insurance company of anything that might lead to a potential claim. Also, there are many different state and insurance company specific time limits to filing a claim; so, always know of any applicable time limits.”
And of course, if anyone is even remotely injured, always file a claim. More on that below.
3 Times it Makes Sense Not to Involve Your Insurance Company
1) It was a one-car accident and you’re not injured, or if you are, you’re able to pay for your medical expenses yourself.
2) You can afford to pay for the costs of damage to your vehicle—or the costs of the repair are close to or not much over the cost of your deductible.
I have heard several stories just like this one:
“I backing out of my driveway about sunset, with the sun shining in my eyes. Next thing I know, my car stops suddenly against a tree. There is no damage to the tree, but there is a scratch on my bumper. Thinking I was protecting myself, I called our insurance company and filed a claim. The next day we brought the vehicle to the local body shop and they gave me an estimate of less than $400 to repair the damage. That little incident stayed with us for FIVE YEARS. Even though the claim had no monetary impact (a $0 payout because the damage was less than the deductible) just the fact that we made a claim affected our insurance rates. Most, if not all, insurers require prompt reporting of claims. However, for minor incidents not involving injury, property damage or when the vehicle is still safe to drive, my advice is to make a police report and obtain an estimate of the damage before contacting the insurer. Just be sure you do it promptly”
So let’s break down that math:
- The cost if the insured had simply gotten it repaired: $400
- The cost of 5 years of an additional $50 per month for the claim: $3,000
There are very many times that filing an auto insurance claim is a bad idea, it really has to do with the math of the policy:
I just had a client that backed into his own vehicle. He caused $1,500 maximum of damage and $1,200 minimum. His deductible was $1,000 so he had to pay that before the insurance would kick in anything. So his maximum out of pocket would be $500. If he filed the claim his rates would also go up and he would probably end up paying back that amount over about 12-18 months and then just get penalized from there on out. This happens frequently in small accidents where a driver could do much better by just paying out of pocket.
3) There’s little to no damage to someone else’s vehicle or property.
This one is straightforward: If you happened to kiss a giant SUV and not leave any lipstick, so to speak, you might not need to get insurance involved. But serious smooches (aka actual accidents) require trading of personal details.
And 3 Times When You Need to File an Insurance Claim
Just as there are times it might work in your favor not to involve your car insurance company after a crash, there are times when you really should file a claim:
1) Anyone is injured and your vehicle is involved. If you, passengers in your vehicle, anyone in the other party, or any pedestrians are injured from a crash, you’ll need to file a claim–especially if there’s a good chance you’ll be found at fault. Medical expenses can skyrocket quickly, and not filing a claim can leave you open to litigation. If you wait to get sued before filing a claim your insurer could deny the claim altogether.
2) When fault isn’t so clear. If you’re involved in a crash with another party that results in either property damage or injuries and fault is disputed in any way, you’ll need to file a claim so that your insurer can represent you. Insurance companies deal with insurance companies, and yours and the other party’s will need to figure out who will pay for what amongst themselves.
3) You hit a fixed object, your car is vandalized or damaged without you knowing who did it, or your car sustains weather-related damage and the costs for repairs of your vehicle or your medical expenses are greater than you can afford or want to pay. If you need $20,000 worth of medical attention, you’ve got to file a claim. Likewise, if damage from an uninsured driver, or you hitting a light pole, causes significant damage to your vehicle (and you’ve got insurance covering these events), file a claim.
If you’re going to file a claim, it’s best to do so as quickly as possible–at the scene of the wreck, if possible. Once your claim is filed, the insurance adjuster will take care of reviewing important materials like the police report, witness accounts, and photos, and they will handle payouts to the other party (if applicable). If you’re the one who needs repairs, the insurance company will work with your repair shop.
The Bottom Line:
We think a safe rule of thumb is: When in doubt, involve your insurance company. One claim won’t always set you back either—some auto insurance companies offer accident forgiveness, where the first time you file for a claim, it has zero effect on your rates. But it’s also always good to keep in mind that the whole purpose of car insurance is to protect consumers from potential financial disaster—not a small financial inconvenience.