Last Updated on August 2, 2023 by John Robinson
Often motorists think of claiming first the moment something happens to their automobile or they are involved in any kind of collision. They think they paid the premiums so far and it is their time to collect. There is nothing wrong with this way of looking at it but it may not always work. There are times it may be simpler and better in the long run to just settle the bills yourself and forget about the whole situation.
What Is Insurance for?
The concept evolves around compensating members’ losses so that they don’t suffer financial hardship. “Member” is a term deliberately used here instead of policyholder. In effect you join some sort of club where members pool money to pay for the unfortunate ones. The insurance company manages this pool of money for a fee. In other words, they take from other members and pay the ones who need help.
In reality, insurance is there for large claims. If this idea was accepted by most motorists the over premiums charged would go down. Many people may think that what is a few hundred to a large carrier. The problem is that these small incidents cost a lot of money in administration to a point that some companies just have a quick look at them and pay, instead of spending hours investigating and checking.
Does the Size of a Claim Matter?
When it comes to calculating renewal premiums, a claim counts as one regardless of its size in most cases. Of course, the larger ones count more but not as much. What really matters is whose fault it is. If you run off the road and cause damage to your own vehicle it isn’t much different than losing control of it and hitting another automobile. The main message here is that you aren’t careful enough and are likely to cause more losses.
If you only have one fairly costly incident in the last 5 years it isn’t as bad. However, if you placed three small claims in the last two years you will struggle to find inexpensive car insurance simply because you become a habitual offender and it is only a matter of time you will cause a big incident with injuries and damages to others too.
That is why motorists should try to avoid making claims wherever possible. There are circumstances that you don’t even need to think about and just call your vehicle insurer. And there are contained cases where you could think about paying it out of pocket or asking the carrier. The latter one is the subject of our considerations here.
Understanding Deductibles
It is the amount policyholders pay before they can claim the rest of the losses. They are usually set around $300 as standard. So, if you had a little incident and it cost you $500 to fix, do you make a claim and let the insurance company sort it out or just look for ways of getting it done cheaper and deal with it out of pocket. The larger the deductibles, the more of the damages you agree to settle.
There is a reason why people can get large discounts when they increase deductibles. When you set it higher, you are saying that I am happy to deal with minor incidents on my own and you just pay me if something really bad happens. Auto insurance companies like these kinds of drivers who are happy to take more risk.
Many people have this mentality and many cannot even be bothered to go through with the paperwork even when it may be worth it and just find a cheaper body shop to get his/her auto fixed. Then, it may be a smart move to increase your deductible and save money as well.
When You Don’t Need to Worry About Making a Claim?
Say you were driving nicely on the road and minding your own space and speed. Suddenly, another car runs into you from behind at a high speed and causes you to crash. This is a type of incident that is clearly the fault of the other driver. At this point the best you can do is to call the police, your insurance company and document the scene as best as you can, getting the names of any witnesses and asking the other driver his personal and insurance details.
At this point you don’t know the extent of your damages and there is another vehicle involved. After all that, some drivers would have the audacity to blame you for this. They may even say that you were too slow and on the way. They can say whatever they like because there are plenty of experts to sort these kinds of incidents very quickly and find out exactly who was at fault.
Once it is established that the other driver was at fault, you can claim on their insurance policy. There are no deductibles on third party claims and they don’t affect your rates. There may be cases where your insurer may have to pay you first, providing you have collision coverage and reclaim it from third party insurers or persons. In that case, you may end up paying the deductible but you will get it back once it is finally settled.
When You Cannot Even Think About Settling Out of Pocket?
If there are other people and vehicles involved, you should do the exact same things as above, regardless of who is at fault. You will hardly be in a situation where it was just a little fender bender and you agreed to settle between yourselves.
Often, you may be surprised what the others could claim once they know you are at fault and your insurance company would pay for it. They may look fine but go away and get a hospital report for a whiplash. These things take years to settle in some cases and you really cannot deal on your own.
When to Consider Paying Out of Pocket?
If it was a totally contained situation where you were the only party involved you could consider the situation. These are little scrapes, hits and knocks that often happen. You may have scraped it on a post in a parking garage or hit a garbage can when you were reversing out of your garage. If you own an older model car, you may be happy to get it fixed by a local garage on the cheap. You have more to think about when you have a brand new and expensive automobile.
You don’t have to call the carrier straightaway in a case like that. You usually have time to make your mind up but don’t take long. Get your estimates and consider your options. You should ideally decide no later than a week, although some companies may accept claims for incidents that happened a month ago.
