Should I Pay for a Minor Car Accident out of Pocket?

Sometimes filing a claim with your car insurance company isn’t in your best interest. This is especially true when you're involved in a minor fender bender. Read on to find when it makes sense to file a claim and when it doesn't.

cars in a minor bender bender accident

If you find yourself involved in a minor accident, you might think you should file a claim. After all, that’s what insurance is for, right?

But filing a claim can lead to higher insurance rates or outright policy cancellation. Depending on your policy and your accident, paying for damages out of pocket may save money in the long run. But it's not always the best choice.

This article covers whether you should file a claim or pay out of pocket after an accident.

Making an Insurance Claim vs Paying Out of Pocket

Deciding to file a claim or pay out of pocket isn't easy. You need to evaluate many factors like accident severity, injuries, your deductible, and your claim history. In some cases, you might be legally required to file a claim.

When Should I Pay Out of Pocket for a Car Accident?

Paying for accident damages yourself may be a smart move if these situations apply to you:

You have recent accidents or tickets on your driving record

Insurance carriers use driving violations to justify raising in premiums. This is especially true if you’ve filed claims recently. Premium increases can occur after a single claim.

Traffic tickets and accidents generally stay on your record for three years. If you file several claims within three years, your rates will rise considerably. If you’ve already filed a claim in the last three years, consider paying for your accident yourself.

Single car accident

If your accident only involves your car, try to avoid a claim. Take your car to a reputable collision repair shop and ask for a repair estimate. If the cost is less than your car insurance policy deductible, you should probably pay for it yourself.

Minor fender-bender

For minor accidents, like a dent or a broken tail light, consider paying out of pocket. However, take steps to minimize your liability. Photograph the accident scene and get the other party to sign a waiver. This will protect you if the other driver later decides to file a claim relating to your accident.

When Should I File a Claim for a Minor Car Accident?

Consider filing a claim if your accident meets these criteria:

Expensive damages 

Is the cost of your claim substantially larger than your deductible? If yes, you’ll probably want to file a claim. For example, pretend you have a $500 deductible and you cause an accident with $3000 in damages. You have two options:

  • Fork over $3000 out of pocket.
  • File a claim and pay a $500 deductible. Your insurance premiums will likely rise. But if your driving history isn't bad, your higher rates won't cost you more than the $2500 difference.

If you file a claim, be aware that causing another accident within three years will raise your rates by quite a bit.

Other drivers are involved

If your accident includes other vehicles, consider filing a claim. The damages you cause may be more expensive than you realized. That can come back to hurt you. If you're involved in a fender-bender, you have two options:

  • File a claim and let your insurance handle everything, from liability to injuries.
  • Pay for the damages yourself, but risk further complications like lawsuits.

If you choose to pay for the damages yourself, you're at the mercy of the other driver. They may inflate the repair costs or end up demanding more down the road. If you file a claim, your insurance negotiates for you and protects your liability.

Injuries

If there's any chance you or someone else involved in the accident are injured, file a claim. A claim will help protect you from a potential injury lawsuit. Injuries to other drivers can cause severe problems for you in the future. It's better to be safe than sorry.

You have accident forgiveness 

Some insurance carriers offer accident forgiveness. It's a policy add-on that prevents your rates from rising after an at-fault accident. If your insurance plan includes accident forgiveness, you can file a claim without hurting your premium. If you have it, use it! To learn if this is a good fit for your insurance plan, please read our guide to accident forgiveness.

How Much Do Car Insurance Rates Increase After a Claim?

Your rate increase amount after a filing a claim depends on whether you’re at fault, the severity of your accident, and your driving record.

But, according to Investopedia, filing a claim can lead to a 20 to 40 percent rate hike. Obviously, your rate hike will be on the higher end if you already have a spotty driving record.

What Should I Do After a Fender-Bender?

First, act quickly. Most states and insurance companies have time constraints when dealing with car accidents. Waiting could lead to unnecessary financial or legal trouble.

You might be tempted to call your insurance agent and ask for advice on filing a claim. They can use a surcharge schedule to estimate how much your premium will increase after a claim. Be warned: some insurance companies require agents to report when customers ask questions about filing a claim. As unfair as it seems, your insurance carrier can raise rates because of it.

If there is any doubt to how severe damages are or if someone is injured, file a claim. Facing an insurance increase is a pain. But it's substantially better than dealing with the legal issues that could arise from an accident.

To learn more about fender benders, read our article 'What to do if you get in a car accident.'

Make Sure You're Following the Law

Most states require drivers to report accidents with injuries. Many states also require drivers to report accidents with certain amounts of damages – typically between $1,000 and $2,500. Getting into legal trouble for leaving the scene of an accident is more damaging than an insurance increase.

But filing a police report after an accident doesn’t mean your insurance has to get involved. You can still pay for an accident out of pocket even if you notify police.

Many people worry that filing a claim and will raise their rates. Keep in mind that each insurer treats accidents their own way including how much they raise rates. That's why it's so important to compare car insurance companies and choose the one that saves you the most money.

Frequently Asked Questions

Q: What is a fender bender?

A fender bender is a minor car accident with little damage to either vehicle. The term refers to the fender, or the frame of the wheel well. It's now synonymous with a small accident that causes superficial damage. A fender bender can refer to more than just the fender. For example, denting a vehicle bumper qualifies as a fender bender.

Q: How much damage does it take before I'm required to report a car accident to an insurance company?

A: It depends on a few factors. If the incident involves another vehicle, you may want to report it to your insurer to protect yourself. It doesn't matter how much damage you think was done. In addition, many states require drivers to file claims when a certain dollar amount of damage is done. Check your state's DMV for more information.

Q: Do I qualify for accident forgiveness?

A: Some companies include accident forgiveness on their policies by default. Others charge extra to add accident forgiveness. Insurers may require a certain amount of accident-free time behind the wheel to qualify. Check your insurance plan and contact your provider to find out if you qualify.

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