Filing an insurance claim vs. paying out of pocket

When is it cheaper to not file a claim?

Anna Swartz 1600

Anna Swartz

Published March 1, 2019

Car insurance exists to protect you from having to pay for auto damage yourself. There’s lots of different kinds of coverage that can protect you in a wide variety of scenarios: Did a tree branch fall on your car while it was parked? Comprehensive insurance has got you covered. Did you hit another driver and damage their vehicle? Liability coverage will help pay for the damage you caused. But is it ever cheaper to pay for repairs yourself instead of reporting damage to your insurance carrier?

When you file a claim with your insurance, you may see an increase in in your premium, which is the regular payment you make to your carrier to keep your auto insurance policy active. If you’re the at-fault driver in the accident, your rates will almost certainly increase, and even if you weren’t at fault, you may still see a rate increase.

For some types of coverage, you have to meet a deductible before the insurance kicks in to cover your costs — so in some select cases, it may actually save you money just to pay out of pocket for the repairs and not file a claim at all, so you don’t risk the rate increase.

But there are also times when not telling your insurance carrier about an accident could land you in hot water down the line. Here’s are the factors you need to consider when deciding whether to file a claim or pay for damage out of pocket.

Who else was involved in the accident?

If you injure someone or damage their property in an accident you should probably plan on filing a claim with your insurance company. If the other driver was at fault, then their insurance should cover any damage to your car, assuming you live in an at-fault state. If you were the at-fault driver, your insurance should pay for the damage you caused, and, depending on your coverage, may cover damage to your own car too

If you live in one of the 12 no-fault states, then even if the accident was caused by another party, your insurance will pay the claim, not theirs.

Resist the temptation to try to settle things without involving either party’s insurance. It may seem simpler in the moment, but it could leave you vulnerable later on. If the other driver decides later to file a claim against you and you haven’t told your insurance company about the accident, they might deny the claim, leaving you on the hook. You also open yourself up to a lawsuit later on, if the other driver discovers injuries or damage they may not have noticed at the scene.

How much will the repairs cost, and how much is your deductible?

If you were in a single-car, at-fault accident, meaning you were the only one involved and the accident was your fault, and only your property was damaged, it’s more likely that you’re in position to consider paying for repairs out of pocket and not filing a claim.

Say, for example, you hit a tree on your own property while pulling into your driveway. Collision coverage would cover the cost of the damage. And if your car is damaged while you’re not driving it, by something like extreme weather or falling objects, comprehensive coverage would cover that.

But both collision and comprehensive insurance require you to meet a deductible (usually $500 or $1,000) before your coverage kicks in. Since you need to pay out of pocket for that amount anyways, if the cost of the damage to your car is close to, or less than, your deductible, you may not need to file a claim. And filing a claim for comp or collision coverage could lead to a rate increase.

Not filing a claim also means you can do the repairs on your own time, which can be helpful when money is tight. If your repairs are just cosmetic, and you don’t have the budget for them now, paying out of pocket instead of filing a claim means you can delay taking your car to the shop until you can afford it. But if you file a claim, you’d have to pay your deductible right away.

A common example of damage it might make sense to pay out of pocket for is windshield repair. Typically, fixing a windshield will cost you less than $500. So unless you have specific glass coverage that doesn’t require you to pay a deductible for windshield repairs, you’re probably better off just paying out of pocket.

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If you’re not filing a claim on damage, should you still tell your insurance?

If your car is damaged and you report it to your insurance, even if you don’t file a claim, your insurance carrier may still record the incident as a zero payout. If this just happens once, it probably won’t lead to a rate increase, but if you’re reporting a few of these incidents, it may affect your premiums down the line.

However if your car is damaged and you don’t tell your insurance, it could mean big problems for you. Even repaired damage may mask internal issues, and if that damage isn’t properly fixed it cause a future accident. If you try to file a claim on that new damage, you may be denied, because you knew about prior issues and didn’t report them to your insurance company.

This probably won’t come up with small cosmetic repairs, but just remember, if you choose not to report damage you dealt with on your own, you run the risk of being held responsible for any further damage that issue might cause.

How to keep your premiums from going up after filing a claim

Say you’ve had to file an insurance claim — that doesn't mean your rates are definitely going up. Most major carriers offer some kind of accident forgiveness, an optional insurance add-on sometimes offered as a loyalty benefit or a reward for safe-driving, which will usually allow you one at-fault accident before raising your rates. If you have accident forgiveness as part of your policy, filing a claim may not raise your rates. A Policygenius expert can help you choose a carrier that offers accessible accident forgiveness.

Even if your rates go up after a claim, there are some things you can do to help bring them back down again. Make sure you’re getting all available discounts that you qualify for. Some of the discounts offered by most major auto insurance carriers include:

  • Student discounts for drivers in high school or college who maintain above a certain GPA.

  • Discounts for drivers who complete defensive driving courses and other certifications.

  • Discounts for paying your annual premium in full as opposed to in monthly payments.

  • Low mileage discounts for drivers who drive less than a certain amount of miles per year.

  • Discounts for drivers who install anti-theft devices in their vehicle.

  • Bundling discounts for combining your auto insurance with your home or condo insurance through the same carrier.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.