Auto insurance may seem like a simple, routine part of life. That is until your car gets damaged. When you’re involved in an auto accident, or your car gets dinged up for any other reason, collision coverage can save you the headache and expense of repairing your car on your own dime.
But if you have collision car insurance coverage, should you file a claim whenever your car is experiencing functionality issues or cosmetically damaged beyond what you’re capable of fixing yourself? Depending on a few important factors including your historical driving/claims record, auto insurance deductible, current ability to cover costs out-of-pocket, etc. you may not want to file a claim after all.
Rather than letting damage from a car accident cost you a fortune, here are some things to consider before filing a claim with your insurance provider.
When Not to File an Auto Insurance Claim
Why is Collision Coverage Useful?
If you finance your car, then you’re likely required by the auto dealership or lending institution to carry collision coverage on the vehicle. If you own the car outright, however, is collision coverage still worth it?
A typical rule of thumb states that, if your collision and comprehensive auto insurance premiums cost more than 10% of what you would receive from the insurance company in the event that you totaled your car, then collision coverage likely isn’t worth the expense.
For example, if you own a car worth $5,000 with a $500 deductible on your auto insurance policy, then your collision coverage wouldn’t be worth it if your comprehensive and collision premiums cost more than $450 per year, which is 10% of the $4,500 payout you’d get from the insurance company.
Fortunately, collision coverage has proven to be worthwhile for many drivers who feel more comfortable venturing out onto the roads, knowing they will be able to replace their car if it gets totaled in an accident.
Do You HAVE to Notify Your Insurance Company After a Collision?
Laws regulating on-the-road accidents and auto insurance typically vary from state to state, but there are a few things that are generally applicable in most cases.
- You are not required to contact your insurance company if there is only damage to your car and you’re considering paying for the repairs out-of-pocket.
- You may contact your insurance agent to ask for a surcharge schedule, which outlines how much insurance rates may rise after a claim is filed, and calculate whether filing a collision claim would cost you more in a two-to-three year insurance rate hike than the one-time repair bills.
- You might have to use your collision coverage if someone else is at-fault for damages done to your car, but your insurance company should “subrogate” and refund your deductible if they successfully get the at-fault party to pay up.
Damage from Road Debris
Did you know that hitting or running over an object on the road is typically considered your fault as the driver? Infuriating though this may be, it’s another important thing to keep in mind as you debate the pros and cons of filing a collision claim to cover the damage inflicted on your car.
But what if an object flies out of someone’s car or truck and hits the hood or windshield of your car? In these cases, you’re considered not at-fault and should file a comprehensive claim instead of collision. It helps if you have dashcam evidence of the incident to support your insurance claim, especially if the other driver doesn’t stop after their loose object hits your car.
And what about potholes? Some cities and counties have road commissions that pay for automobile damage caused by potholes in the area. But, in some cases, you may be on the hook for damages caused by hitting potholes in the road.
Comparing Costs
According to a new study, the average auto insurance premium increases 41% after just a single claim. If you pay an average of $1,000 for auto insurance each year, then you could be paying $1,410 or more next year if you file a claim for damages in excess of $2,000 this year.
So what does this mean for you and your decision to file a collision claim or not? If the repair bills might cost between $1,500 and $2,500, then it’s up to you to decide if you want to pull from your emergency savings account to cover the costs on your own or pay the $500-$1,000 deductible and let your collision coverage handle the rest.
Of course, it’s also worth noting that multiple claims filed within three-to-five years of each other could send your auto insurance premiums skyrocketing, or lead your insurance company to cancel your coverage altogether.
Should You Avoid Filing a Collision Claim After All?
Unless you absolutely can’t afford it, it’s generally preferable to cover your car’s repair bills when you could be partially or entirely at-fault for the damage sustained in an accident. Filing just one claim can lead to a substantial insurance rate hike lasting three years or more.
Collision coverage is best applied when your car is totaled in an accident and you need a replacement vehicle to resume your normal daily life. Filing a claim for damages that you can plausibly cover on your own could create more cons than pros. That’s why it’s important to set aside money for emergency auto repair bills to spare yourself from the costly insurance rate hike that could result from filing a claim after an at-fault accident.
