When You Shouldn’t File a Claim on Your Auto Insurance

by Emily Guy Birken · 8 comments

Several weeks ago, my husband was horrified to find that some miscreant decided to key his beloved 1993 Volvo 240 while it was parked at our local Wal-Mart. The paint was scraped off all the way to the metal underneath, with the damage spanning two separate door panels.

Because the car is 20 years old, the “simple” repair will be fairly costly, as the body shop will have to mix the paint in order to match the now-faded factory color. Basically, some jerk’s 30 seconds of malicious fun will cost us $800. Since our auto insurance deductible is $1000, we’re going to be paying for this out of pocket.

But even if we had a $500 deductible, we would still decide to pay for this repair on our own. That’s because in the world of auto insurance, filing a claim isn’t just about having your insurer help you out with repair costs.

Your insurance company can adjust your rates depending on the number of claims you file, so it can often cost less in the long run to simply pay for certain repairs yourself.

The problem is, that with relatively small repairs, it can be difficult to figure out whether you’re better off filing or paying.

Here’s a quick primer on when you shouldn’t file a claim:

When the Claim is Only a Little Higher Than Your Deductible

Paying for our own repair on the keyed Volvo is the obvious solution, considering the fact that alerting the insurance company would only add to our record (even though the damage is clearly not our fault).

But even if the claim is a little higher than your deductible — say a $1,200 repair on a $1,000 deductible — you might still want to keep your insurance out of it. This particular repair might not affect your rates, especially if you’re not at fault, but if you do have to make a more substantial claim in the next couple of years, the smaller claim can end up counting against you.

When You Already Have Moving Violations on Your Record

This particular piece of advice only applies if you’re in a single-car accident (or someone damages your car while it’s parked and doesn’t leave a note). If you’re involved in an accident with another car (or cars), or even a single-car accident when you have a passenger, then it’s in your best interests to inform your insurer — just in case there are long-term health repercussions for the drivers or passengers. In these cases, filing is the best way to protect your finances in the long run.

However, if you simply backed your car into a pole or managed to swipe your side-view mirror on the way into the garage, getting your insurance carrier involved could end up being a costly mistake if you already have some tickets or other violations on your record. Your insurer already sees you as a potential risk. Filing a claim for a minor repair will likely cost you; pay out of pocket now to avoid having outrageous insurance premiums later.

The Bottom Line

One of the many reasons why it’s a good idea to have a healthy emergency fund is to make these sorts of insurance decisions much simpler. If you have enough cash set aside to handle out-of-pocket expenses, you won’t have to face the catch-22 of not being able to afford a repair now without filing a claim — and then not being able to afford your premiums later because you filed a claim.

How do you decide whether to make an auto insurance claim or not? 

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{ 8 comments… read them below or add one }

lee June 28, 2013 at 10:11 am

You are right here especially if you are a young driver. Just the thought of making a claim makes me cringe and i can see my premium going through the roof when i have to renew it.

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Frankie's Girl June 28, 2013 at 1:22 pm

That would infuriate me – the senseless damaging of something like a car would have me seeing red for a while.

But…Unless the damage is in the form of obscene words or drawings, why on earth would you pay that much to touch up a 20 year old vehicle? You can go to the dealership, get a paint touch-up tube for under $15 (maybe a bit more, but under $50 for color, clearcoat and a little fine grit sandpaper if you want to really blend it in) and do it yourself. Even if the color has faded, you probably could find a close match or just get a clearcoat that will prevent it from rusting and save both the claim on insurance and the large out of pocket expense. It may not be perfect but it will be close and I imagine a 20 year old car already has some dings and scratches, so it would eventually not even register.

Paying that much money out for a cosmetic (granted it would eventually rust) repair is definitely not frugal in my humble opinion. The value of the car is probably under $,3000, even if in good running condition, so paying out a third or more of the cost of the car itself for a cosmetic fix just doesn’t make sense if there is a “pretty good” alternative.

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Emily Guy Birken June 28, 2013 at 5:38 pm

@Frankie’s Girl, you’re absolutely right that getting the scratch fixed isn’t frugal. We’re fixing it because the car isn’t just transportation for my husband, but an object (and labor) of love. He is a car guy’s car guy, and he’s put a lot of sweat, love, and time into the car. We’re willing to spend the money on the fix because it will make him feel better about the car, and because our general frugality elsewhere in our lives gives us the financial leeway to make decisions like this, even if they aren’t the frugal path.

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zimmy@moneyandpotatoes.com June 28, 2013 at 6:30 pm

I have recently paid off our 2006 vehicle but can’t bring myself to pull the full coverage insurance. It costs about $50 extra a month but provides a little bit extra protection for us should something happen. Although, I will probably end up removing in the next 6 months or so because the car will be coming up on 7 years old.

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Paul Gardner June 29, 2013 at 11:41 pm

Well, if we all took that attitude of fear of making a claim then why have insurance? They make tons of $$$$$$ profit. Except for claims close or over the deductible, I say, this is what insurance is for. You are paying for it to replace your lost $$$ on damage. This is how insurance works. I say never be afraid to file a needed claim.

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Property Marbella June 30, 2013 at 1:40 am

It will always be much cheaper to repair the car yourself or with a friend who does it for a cheap price. Insurance companies are for-profit enterprises, so it is always you who will pay in the end.

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Grinch July 4, 2013 at 9:43 am

Your insurance history follows you just like your credit history. You can receive a copy of the report your insurance company uses to rate you as a customer. It is similar to your credit report and is called the Comprehensive Loss Underwriting Exchange (CLUE) report. It is free if you have received an adverse action letter or your rates have increased, your insurance has been denied or cancelled, or your coverage limited. The website is http://www.consumerdisclosure.com. You can also receive a copy when you change insurance companies. I do not know if it reports homeowner’s insurance claims since we have never filed a claim for our home. Your claims history follows you even when you change companies. That is enough to convince me not to file a claim unless it is necessary (injuries, another vehicle involved, damage more than I can afford).

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Pursuit July 6, 2013 at 2:14 pm

While living in Alberta, I had a fleeting encounter with a frozen ice bank leaving the left front headlight damaged. Total repairs around $2,500. Subsequently moved to BC where the provincial “no-fault insurance” system is in place. In spite of no driving demerits whatsoever, I fell to the bottom of the seven year penalty list and am paying twice as much as my husband (I might grudgingly add he was “accident free” as all his collisions were with a company car and he still got the experienced driver rate as he was listed as an occasional driver of my car). Hrumphfff! I think this little crash will have cost me about $5000 dollars after all is said and done.

I haven’t done much research but think it’s probably best to get a high deductible and saving on that part of the agreement and accepting the reality it’s better to pay up front for anything less than $5000.

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