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?