Should You File an Insurance Claim or Just Pay Directly?

There’s nothing good about being in a car accident. Unless you happen to live in a romantic comedy, and manage to meet the love of your life in a cutesy fender-bender, there’s not much positive to say about hitting something with your car, or having another car or inanimate object hit your car.

One of the biggest headaches coming out of an accident: what’s this going to do to my insurance?

We all know that accidents of any kind aren’t good for our insurance premiums. On the one hand it makes sense – if you get into an accident, insurance agencies tend to think that you’re likely to get into another one, which means providing you with insurance is riskier, which means they need to charge you more.

On the other hand, that’s what you have insurance for in the first place. It seems like, for insurance companies, an ideal customer is one who pays a monthly fee and never uses their insurance.

But then you do get into an accident. Repairs are required. And you ask yourself, “Should I let my insurance pay for this?” Here's how to figure that out.

Is it a single car accident?

Let’s say no one else is involved. Only your car has been damaged. A few years ago, in the middle of a snowstorm, I spun out on an exit ramp and cracked up the front, right edge of my vehicle. (I say “cracked” instead of “crumpled” because it was the kind of car that cracked instead of crumpled, unfortunately.) The car was perfectly drivable, it just looked off. I decided to leave it be.

But let’s say you can’t leave it be. It needs to be fixed. Should you use your insurance or pay out of pocket? Well, let’s consider the following:

What's your deductible?

Before your insurance company pays for any repairs, you’re going to have to pay a deductible. The amount is usually fixed and generally pretty high if you pay a low premium (conversely, the higher your premium, the lower your deductible – it’s one of the ways that insurance companies manage risk).

If the repairs are less than your deductible, pay out of pocket. If they’re slightly higher, you might still want to pay out of pocket. If you're not saving any money, there's really no incentive to get your insurance company involved.

What does your policy say?

Not all insurance policies are created equal. It’s difficult to say what an insurance claim will do to your premiums without understanding what your policy looks like. Some policies forgive accidents under a certain dollar amount. Some policies forgive your first accident, whatever the cost. Some consider your full driver history before making a potential rate increase.

Speak with your insurance agent to fully understand all of the ramifications of your potential insurance claim. If the repairs are more expensive than the deductible, and your premiums won't go up, then let your insurance company pick up the tab.

What are your demographics?

In order to control risk, insurance companies make a lot educated assumptions about drivers. Your demographics – your gender, your age, your education level, your credit score – all factor into your insurance policy. Historical data shows that women are less likely to be involved in accidents than men, so their insurance rates are lower. Young drivers and seniors pay higher rates than middle-aged drivers. A poor credit rating can also net you a higher monthly premium.

So when considering whether or not to file a claim, consider your driving record and your demographics. If you’re a highly desirable customer, your insurance company is less likely to raise your rates for fear of losing you to another insurance agent. And if they do raise your rates, you should start shopping around for a better insurance plan.  

Is it a multiple car accident?

So now let’s say you get into an accident with another car, and the other driver says, “Let’s not bring the insurance companies into this.” They want to work something out directly. If you’re at fault, they want you to give them cash for the repairs. If they’re at fault, they promise to pay your costs out-of-pocket.

Don’t.

Unless you’re dealing with a friend or a family member, the safest way to handle any accident is to let the insurance companies work it out. It’s not necessarily that you should never trust strangers, but you’re going to have a very hard time finding a happy compromise.

If you’re paying for their repairs, you’re going to want a say in who does those repairs. Your interest will be in limiting costs – their interest will be in getting the best possible service, independent of cost.

Also, just because you pay for someone’s repairs out-of-pocket doesn’t necessarily mean they won’t still go ahead and file an insurance claim anyway.

So stay out of that particular quagmire. Let your insurance company sort it out. After all, that’s what you’re paying them for.

Insurance premiums uncomfortably high? Check out our guide to bringing down the cost of car insurance for more detailed, money-saving tips.

Article updated October 2020