When It Pays to Keep Secrets from Your Auto Insurer

auto insurance claims

Five years ago, while driving home from work, I stopped at a red light — a fact lost on the woman behind me. She sailed right into me. It turned out that besides not being very observant, she was also uninsured and broke.

When I got out of the car to check the damage, there were only minor dents, but the paint? Wrecked. My first instinct was to call my insurance company right away, since my car had an expensive custom paint job. But I decided to wait until I could get to the body shop and ask their opinion.

I’m glad I did. They were able to fix the job quickly for under $500. If I had reported it to my insurer, they would have raised my premium by about $50 a month. Over time, the added expense would have cost me hundreds more than paying for the repair myself.

As I discovered, auto insurance claims can be a lifesaver, but in some situations, they can feel like a hit-and-run on your bank account.

Cost of car insurance

Auto insurance can add hundreds of dollars to the already-high cost of car ownership. As of 2016, the average annual insurance premium was $1,323. That expense can be tough to swallow, especially if you’re on an entry-level salary or have student loan debt.

Even if you have a policy you can afford now, that can change. Accidents and claims can cause your premiums to skyrocket. In fact, a 2017 study by Insurance Quotes and Quadrant Information Services found that a single claim for $2,000 or more can cause your premiums to rise by as much as 44 percent.

Depending on where you live, the cost can be even higher. In California, your rates could increase by a staggering 63 percent.

With such a high increase, sometimes submitting a claim is just not worth it.

How auto insurance claims work

When you apply for a car insurance policy, you choose your coverage amounts and deductible. You might have a $500, $1,000, or even a $2,500 deductible. That number is what you have to pay before your insurance steps in and covers the rest of the bill.

Your deductible plays a huge role in deciding whether to file a claim. Too many claims, and your insurer may increase your rates — or might even drop your policy altogether.

If at all possible, it makes sense to avoid submitting auto insurance claims. If you save filing a claim for major accidents, you could save money over time.

Should I file a car insurance claim?

Many people worry about how a claim will affect their premium. Although it’s good to be cautious, you pay your insurance premiums to have a safety net in case of an accident. Using your insurance in certain situations can be helpful and save you money.

Before deciding to contact your insurance company, ask yourself the following questions:

  1. Does your insurance company require a claim? Some insurance policies demand that you notify your insurer if there’s any incident or damage to your vehicle, even small fender-benders. To avoid violating claim policies, review your insurance paperwork and agreements.
  2. Has anyone been injured? If you, a passenger, the other driver, or a pedestrian is injured, you should file a claim right away. If you are at fault, you could be on the hook for medical expenses and legal fees. Immediately opening a claim ensures that your insurance company will help you through the process and cover some of the cost.
  3. Do I know who’s at fault? In some accidents, it can be unclear who was responsible. Submitting a claim makes sense in that situation, since your insurance company will negotiate with the other insurer on your behalf.
  4. Is the damage mechanical or cosmetic? If it looks (or sounds) like the car has mechanical problems after the accident, it’s a smart idea to file a claim. Many issues can seem minor but then turn out to be serious problems that can cost thousands.

When to think twice about submitting a claim

If none of the above situations apply to you, filing a claim might not be the wisest move. The damage might be relatively inexpensive compared to your deductible. Paying out of pocket might be cheaper over the long-term.

These three common scenarios are good examples of when to skip auto insurance claims:

  1. It was a one-car accident, and you’re okay. If you hit a tree or a deer, but you’re fine, it might not be worth reporting it to your insurer. If the damage isn’t significant, paying for the repairs yourself will often be much cheaper than filing a claim.
  2. The repairs aren’t much more expensive than your deductible. You can resolve many issues for less money than your deductible. For example, if a rock hits your windshield and cracks it, you can usually get it replaced or repaired for $300 or less.
  3. There’s little damage to the other vehicle or property. If you are in a minor accident, and there’s only slight cosmetic damage, it might make sense to pay for the repairs yourself.

Understanding your car insurance policy

Before you decide on submitting a claim, it’s important to understand your insurance policy’s rules thoroughly. Submitting auto insurance claims can cause your premiums to rise, but it can be a valuable resource in the case of a serious accident.

And if high premiums are causing you to second-guess filing a claim (even though you know you should), then these nine tips can help you find a cheaper policy.

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