It seems simple enough: you pay for car insurance so that if something happens to your car, it’s covered by your insurance company. Right?
Not quite. "It’s important to remember that auto insurance companies, like all other businesses, are trying to grow their business and make a profit,” says Ryan Molloy, Assistant Vice President - Private Client Group of HUB International New England. “The more at-fault accidents a driver gets into where the insurance company pays for the damages, the more likely that driver is to pay higher premiums or to have their policy cancelled or non-renewed.”
Like Molloy states, getting in an accident or receiving a moving violation could result in a few unfavorable consequences if a claim is filed:
- Your car insurance rates increase.
- You’re up for non-renewal with your car insurance company.
- You’re forced to pay high-risk insurance until your oldest claim “expires” after three years.
Since the decision could end up costing you thousands of dollars in the long run, it’s important to know when filing will be more beneficial than punitive. We’ve boiled down two lists to cover the basics of when to file and when to hold off.
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When to File the Claim
If someone is hurt
If you’re involved in an accident in which you or another person—in your car or someone else’s—is physically harmed, file a claim. Because injuries can exacerbate with time, requiring continued treatment or instigating delayed legal action, it’s best to protect yourself with insurance. Filing a claim at the time of the incident will help ensure that your story is properly documented and corroborated.
If you’re not at-fault
If you’re involved in an accident in which the other driver is at-fault, it’s wise to inform your insurance company as soon as possible. Working through the other driver’s policy is an option, but their insurance company may be hesitant to provide you with proper and timely assistance. Your premium typically won’t rise if you’re not at-fault.
A claim should also be filed if your vehicle is stolen or vandalized. The car insurance company will verify the claim with the police, so make sure that the police report lists the name, badge number, and telephone number of the officer who handled your case.
If the cost of damage is significant
If you were in an accident that caused significant costly damage to your car, it probably warrants a claim. Be careful when assuming that repairs will be affordable. Damages are often more expensive than they appear.
More: Types of car insurance
The bottom line: Molloy concludes that “if there are any injuries or major property damages, regardless of who’s at-fault, report the claim immediately to your agent/company! The purpose of car insurance is to help pay for injury or damages you’re found responsible for, but that you can’t afford to pay out of pocket.”
When to Hold Off
If your policy is new
Customers who have been on the same auto insurance policy for years with few to no claims may find that their insurer is not as strict when they do file a claim. You don’t want to start off on the wrong foot with a new auto insurer.
Some insurance companies won’t hike up your premium until your second accident or violation. Depending on the size of your claim, you may consider using this get-out-of-jail-free pass.
If the cost of damage is slightly more or less than your deductible
Filing claims on your policy can cause your premium to go up, so it doesn’t make sense to file if the cost of repair is less than or slightly higher than your deductible. You’ll also save yourself the hassle of going through the claims process.
If you have a history of accidents and/or moving violations
You’re a good candidate for a steep premium increase if you file a claim when you already have recent accidents or moving violations on your record. If possible, avoid filing a small claim if it will be one of many.
The bottom line: In certain cases, filing a claim would raise your premium without much benefit to you. Remember that this list is only a guideline—each claims instance varies by insurance company, the insured’s history, and other factors. Molloy advises consulting your insurance agent about how your premium could be affected in the future by different claims scenarios.