After an Accident, Should I Submit a Claim or Pay Out Of Pocket?

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Getting into a car accident can cause a whole bunch of problems. Your car could sustain extensive damages or, even worse, you could get injured and need medical care. But beyond that, getting into a crash usually means that your car insurance premium will increase—even if you weren’t at-fault.

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When should I submit a claim and when should I pay out of pocket?

With the national average for auto insurance coming in at just under $1,005 per year, car insurance is already expensive. Because of this, after an accident many drivers will debate whether or not to file a car insurance claim in order to avoid an increase in rates. And while there are some situations where you can get away with paying for the damages out-of-pocket, when the damages are more serious or there are medical expenses involved then filing a claim may be your best option.

If you’re wondering exactly how much your rate will increase after an accident, it’s hard to determine. One study estimated that after filing a claim of $2,000 or more, your rate could increase by more than 44%. Usually, your insurance company will account for the severity of the accident and your claims history to calculate your rate increase.

If you do decide to file a claim, the insurance company won’t immediately raise your rate. Policy changes go into effect at the end of your renewal period. So if you have a claim shortly after your policy starts, you could go an entire year without seeing the result of a rate raise. In that time, you would be able to find ways to lessen your insurance premium increase through possible auto insurance discounts or by switching carriers.

Keep in mind that there are potential repercussions if you decide not to file a claim after an accident. It’s always best to report a claim following any crash, even a minor one. For instance, if another driver involved in the crash decided to sue you weeks after the accident, your insurance company might not cover your legal fees because the crash wasn’t reported. It’s also possible that you could risk losing your coverage altogether by not filing a claim.

What should you take into consideration when paying out of pocket or submitting a claim?

Before you decide whether or not to file a claim after an accident, there are some things you need to take into consideration. You’ll want to base your decision on the number of people involved in the accident, who was at-fault and the total cost of the damages.

Number of people involved

First, take into consideration the number of people who were involved in the accident. If you were the only person involved, then you have full control over filing a claim. But if there are two or more drivers involved then you may not have a choice because one of the other drivers may insist on filing or may go ahead and file without even telling you.

Who was at-fault

It’s also important to consider who was at-fault. If you were at-fault, your insurance premiums will surely increase if you file a claim. But if someone else caused the crash, their insurance company will cover your vehicle’s repairs and your medical expenses. If you were not at-fault, your insurance rate will likely still increase, but not significantly.

Cost of repairs

The biggest factor in deciding whether or not to file a car insurance claim is the cost of repairs. After a fender bender with minimal damage you can probably cover the cost out-of-pocket. But after a major accident, the cost might be too high for you to personally pay for. Also, consider if your deductible is higher than the out-of-pocket repair cost. If your deductible is higher, you won’t get a payout from the insurance company. In that case, not filing a claim may be a better choice financially.

What is a zero payout?

If you’re on the fence about filing a claim, you can report the incident to your insurance company without filing a formal claim. This is called a zero payout. Although you won’t get reimbursed for the damages, it eliminates the risk of not reporting the accident. Typically, one zero payout won’t affect your insurance premium. But if it happens a few times, your rate may increase.

If I have to file a claim, how can I keep my premium from going up?

If you decide to file an insurance claim, you can expect an insurance premium increase. However, there are a few ways to keep your premium from increasing significantly after an accident.

Get accident forgiveness

Before you file the claim, check your car insurance policy to see if you have accident forgiveness. Accident forgiveness is usually sold as an add-on policy, but some major insurance companies include the coverage in standard insurance policies. If you have accident forgiveness, your rate won’t increase after the first accident for which you file a claim. If you don’t have accident forgiveness, it’s a good idea to consider adding it when you renew your insurance policy.

Take advantage of discounts

Most insurance companies offer discounts for customers who meet certain criteria. If you aren’t already taking full advantage of discounts, now is the time to do so. Contact your insurance provider to find out what discounts you may be eligible for. Most companies offer discounts for drivers who have certain safety features installed in their vehicle, pay their annual premium in full, take a defensive driving course or sign up for autopay billing.

Bottom line

Getting into an accident can be very frustrating, but in most cases it’s in your best interest to report the accident to your insurance company. Even if you can afford to pay for the damages out-of-pocket, you’ll take on serious risk by failing to report the car insurance claim. If your insurance company finds out about an unreported claim, your rate might increase significantly, or you could lose coverage altogether.

Remember that accident claims usually stay on your driving record for three to five years, so your rate will eventually decrease, assuming you remain claims-free. If you’re able to take advantage of accident forgiveness or other discounts, your rate could go mostly unchanged following a claim. After an accident, it’s important to take the necessary steps to avoid future claims, so you don’t risk another rate increase.

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