Should I Pay for an At-Fault Claim Myself?

Sometimes it is cheaper overall to pay an at-fault claim out of pocket

A couple of reasons exist to make people think twice before filing an at-fault claim. Potential non-renewal for multiple at-fault claims and the high cost of insurance due to surcharges should make you carefully consider filing an at-fault claim. Lots of at-fault claims are definitely worth filing while others might be cheaper to pay out of pocket.

Questions to Consider Before Paying a Claim Out of Pocket

Were any other vehicles involved?

Man with crashed car calling for roadside assistance,
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Minor single car accidents are the best to take care of out of pocket. The costs for repairs are usually the lowest. An at-fault accident usually stays on your record for three years. Ask your insurance agent how filing the claim would affect your rates. Agents may not be able to give you an exact dollar amount, but they can still place you in the ballpark. Agents will be able to review your driving record to see if the claim is worth filing.

Example: You accidently scrape the side of your car against your garage. The estimate to remove the scratches is $550. Your deductible is $500. It may not seem worth going through the claims process for $50 in return.

Recently filed an at-fault claim or a traffic violation in the last three years?

Car crash against pole by road
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The severity of penalties increases with multiple claims and traffic violations. If you have already had a claim or speeding ticket recently, the benefit of paying a claim out of pocket increases significantly.

Example: You hit a large pothole on your way to work. It damages your tire, rim, and alignment. The cost of repair is $1100 and you have a $500 deductible. You also filed an at-fault accident on your car insurance policy less than a year ago. Having two at-fault accidents on your record will put you up for non-renewal. You would have to get high-risk insurance until the oldest claim is more than three years old. It would be more cost effective to pay for the pothole claim out of pocket vs. collect $600 to help with repairs.

High-risk insurance can be very expensive. It often requires switching car insurance companies. Filing two at fault claims for a single driver within a three-year period almost always classifies you as a very high-risk driver.

Are the costs of repairs within $500 to $1000 of your deductible?

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It is reasonable to think the cost of an at-fault surcharge could cost you up to $500 over a three-year period in surcharges. The surcharges can be a higher dollar amount depending on coverage on your vehicles and other violations. You need to determine if you can afford the repairs on your own.

The nice thing about filing a claim is how you will not need to come up will such a large lump sum. You will need to pay the deductible and the surcharge will be paid over time. $500 can be a lot easier to come up with than say $1100.

Example: You decide to file an at-fault claim with a $600 payout. Your surcharge for the next three years results in an increase of $300. But, six months down the line you are at-fault in a major accident with $10,000 in damages. You would definitely want to file the second claim because of the high dollar amount, but you would have been better off paying the first claim out yourself. Of course, you didn’t know you would need to file a second claim, but it is something to consider when filing a smaller at-fault claim.

Are the cost of your damages below your insurance carrier's surcharge threshold?

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Most insurance carriers allow a small amount to be paid out in an at-fault accident without surcharging. Many carriers have a $500 limit. Any amount paid out by your carrier under their threshold, $500, will not affect your rate.

Example: Your side mirror gets pulled off when you don’t clear the bank teller station. The repair costs $900 and your deductible is $500. After you pay your deductible, the insurance company covers the remaining $400. Because less than $500 was paid out, your insurance rate will not be affected by filing the claim.

Not all insurance carriers have the same threshold for at-fault claims. It is important to check with your insurance carrier to see if a threshold is allowed.

At-fault claims are always irritating. Your first instinct might always be to file the claim. Luckily lots of claims are a no brainer and call for immediate filing. It is the smaller claims that bring more variables to the table. Focus on the overall cost of filing a claim vs. paying for it on your own. Often, filing the claim wins out because you can tackle the increase in monthly increments instead of coming up with a larger sum up front.

Do you have a good sized emergency fund?

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Many people will read this article and think I am crazy. That is what insurance is for! What good is it if I do not file a claim when my car is damaged? Well, car insurance is not a maintenance plan. It is of much more value when used on major accidents. Having a good sized emergency fund ready to go can save you so much money in the long run. Minor damage to your car or home are both great reasons to consider tapping into your emergency fund versus filing an insurance claim. If you have the money available, consider the overall cost of filing a claim versus covering the cost on your own.

Tips for Building an Emergency Fund

  • Start small: $25 a month will start adding up over time
  • Save your tax refund
  • Save your pay raise
  • Are you paid biweekly? Live on 2 paychecks a month and that will give you 2 free paychecks a year - save them!

It is a good idea to have an emergency fund large enough to cover your insurance deductibles and beyond. There is no limit to how important an emergency fund can be to your financial well being. Use it for emergencies only and you will thank yourself in the future.