In order to produce the podcast and keep content up free for you, I work with partners so this post may contain affiliate links. Please read my full disclosure for more info.
Note: Check your insurance policy to make sure you're following the contract. For some insurers, you're required to report any ‘event', but may not have to file a claim.
When you think about any sort of situation where you’re involved in an auto incident, then your first instinct is to get the insurance companies involved.
If you’re paying all that money for auto insurance in the first place, it makes sense to have the insurance companies foot the bill for damages, right?
Running the Numbers on Auto Insurance
But thinking about it from another point of view, there are certain reasons why you may want to keep the matter internally and avoid the auto insurance companies and claims departments altogether.
Here are four cases you shouldn’t file an auto claim in:
Minor Damage
It may be tempting to file a claim for small yet noticeable damage, but keep in mind the entire underwriting process is about trying to discover who you are as a driver – and what your driving habits are like.
Underwriters don’t just look to the severity of the claim to see what you’re doing; they also focus on the frequency of claims you make.
Therefore, if you’re going to file multiple claims you will be labeled as high risk and could eventually pay significantly higher rates as a result.
When it comes to minor damages (things like paint scratches,
dingers on your car, and other non-noticeable marks), you need to be conscious of the idea that you could have major work done to get something repaired.
However, you could also be trading away significantly higher rates in the future in order to do some cosmetic touch ups in the present.
Keeping It in the Family
Insurance is nothing more than a legal contract. It is put in place to help people who do not have a prior relationship settle their legal and financial obligations to one another.
There are, after all, a significant number of things to deal with beyond just the cost of the repairs.
That being said, when you have a potential claim that involves a family member or close personal friend, you could theoretically solve the issue yourselves and keep the insurance companies out of it.
Paying for the repairs yourself will most likely be more affordable than paying toward your deductible and a higher premium going forward.
When you consider the fact that your future costs won’t skyrocket, it could be a very good strategy where both parties come out ahead.
Damage Below (or Near) Your Deductible
When you have a deductible of say $500 or even $1,000, you’re basically agreeing to eat that amount of any given claim.
Assuming you have a $500 deductible, if you turned in a claim worth $600 then you would only receive a refund of $100 for the claim from your insurance company.
It doesn’t make complete sense to deal with such a situation especially when it could hurt your future risk profile, does it?
The other thing to be aware of is what happens if you actually have a claim that is below your deductible.
If your claim was $750 and your personal deductible was $1,000, then the insurance company isn’t reimbursing you for anything.
In that scenario, reporting the claim might just be a way of telling them how accident-prone you are without actually getting anything back in return. In those types of scenarios, just avoid filing a claim altogether.
Your Record is Already Spotty at Best
If your current record is already spotty and you have a couple of marks going against you (prior claims, speeding tickets, late payments, etc.) it doesn’t help to add fuel to the fire.
In addition to paying an objectively high premium, you could venture into non-renewal waters.
Obviously, there are some factors in any given case that you need to consider. When it comes to things like damage to the property of others or even medical bills, then it’s wise to file a claim because to go without it would be financially crippling.
If you do get to the point of being non-renewed by your insurance company though, don’t lose hope, these days it’s easy to compare auto insurance without the pain of dialing each individual company for a quote.
In the end, use your best judgment when filing a claim. By assuming that anything happening to your vehicle is grounds for a claim, you’re only selling your sky-high future premium fate.
Simon Davis has been a full-time business writer for the last 4 years and has had the privilege of attending some of the most renowned business conclaves held across the world.
When not on business he loves spending time with his girlfriend and a few adventure sports.