Should you Make a Claim on your Auto Insurance?

Making a claim on your auto insurance may increase your car insurance premiums. Does it always make sense to make a claim or does it pay to hold off sometimes? We explore the various scenarios below, helping you see the difference between making a claim and not making a claim.

Know Your Deductible

Before you make a claim on your auto insurance, you should know your deductible. That’s the amount you must pay before your insurance will kick in. For example, if you have a $1,000 deductible and the damage to your car costs $500, your insurance won’t cover anything. In this case, it doesn’t make sense to file a claim on your auto insurance. It would potentially increase your premiums and it wouldn’t help you financially.

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Now, if you have the same deductible, but the damages were $2,500, it may make sense to make the claim. In this case, your insurance may cover the remaining $1,500, depending on the limits of your coverage.

What happens if the amount of your claim is close to your deductible? Let’s say you have a $1,000 deductible and the damages are $1,200. You may want to seriously consider not filing a claim. You’ll have to decide at what point it makes sense to file the claim. It will depend on your finances, though. If you have an emergency fund set up for issues such as this, it can help offset the need to file a claim when the cost of the damages are just slightly higher than your deductible.

Will Your Auto Insurance go up if you Make a Claim?

This is the worry most people have as it’s common for premiums to increase after an accident. Just how much your insurance premium will increase depends on many factors including the amount of the damages, the reason for the accident, and your payment history.

Auto insurance companies have to gauge your risk of filing a claim. Once you file one claim, your chances of filing another increase, which is why premiums tend to go up. Not every insurance company increases premiums for every accident, though, it depends on the circumstances.

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How do Car Insurance Claims Work?

If you decide to file an insurance claim, you should know the steps to take:

• Call your insurance company to make the claim. Let them know about the accident. This starts the claim process. Know that if you call your insurance agent just to ask questions, but not officially start a claim, it still becomes a part of their record and could affect your premiums even if you don’t file a claim.
• The insurance company will send out an adjuster. The adjuster will come out and evaluate your car. He or she will assess the damages and give you a dollar amount that the insurance company will pay for the damages.
• You receive the funds. Next, the insurance company will work out a disbursement method with you. Oftentimes if you use a body shop that the insurance company works with, you’ll get a better deal and the insurance company will pay the body shop directly. This means you don’t have to pay for the damages and wait for reimbursement.

Should you Pay out of Pocket When Other People are Involved?

If there are any other people or cars involved in the accident and you are at fault, it’s always wise to involve your insurance company. In this case, it’s less about worrying about increasing premiums and more about worrying about financial destruction.

When other people are hurt or other cars are damaged, they become your responsibility to cover. The people injured in the accident may also sue you if they feel they didn’t get compensated enough. When you involve your insurance company, you have the financial protection as well as representation to try and avoid legal consequences for the accident.

Making a claim on your auto insurance is usually a good idea unless no one was affected by the accident except you or your car and the damages are close to the cost of your deductible. If you need any type of protection from others, though, let your insurance company know if the accident and use their services – that’s what you pay for.

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