When Should You Pay Out-of-Pocket for a Car Accident?

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Accidents happen. When damage is minimal and an at-fault driver wants to pay out-of-pocket, this arrangement could be a convenient way to prevent that driver’s insurance rates from going up significantly. However, paying out-of-pocket is not in your best interest if there are injuries involved or if the other driver presents certain red flags. 
Deciding when to allow out-of-pocket payments can be a tricky exchange. In some situations, an out-of-pocket payment will benefit both parties. In others, a driver can be pressured into accepting a deal that costs way more than expected in repairs—or worse, leads to trouble with the law.
To ensure you’re always making the best decision, the car insurance experts at Jerry have compiled everything you need to know about out-of-pocket payments and when you should think twice before accepting them.

What is an out-of-pocket payment?

An out-of-pocket payment is any payment that comes directly from someone's personal finances—their bank account, savings, and, of course, pockets.
In the context of car insurance, an out-of-pocket payment is a payment that you make on your own to cover the damages resulting from an accident. This is as opposed to payments made by your insurance company on your behalf.

Why pay out-of-pocket

Most insurance policies come with a set deductible you’ll be required to pay in the event of an accident. If the deductible seems higher than the cost of repairing the damage, then both parties might let the at-fault driver pay for the damage out-of-pocket. 
Every situation is different, though—this is just for someone to keep insurance out of the picture.
Some other popular reasons behind out-of-pocket payments are as follows:
  • The driver doesn’t want their car insurance rates to increase.
  • The driver doesn’t have insurance (in states where this is legal)
  • The driver suspects the cost of damage will be less than the cost of insurance after the increase in rates.
In any case, a driver might suggest an out-of-pocket payment after an accident because it may help one or both parties save money and/or avoid complications. Drivers can be unpredictable, which is why your insurance company uses deductibles in the first place—but the same goes for people
If you ever feel pressured into letting an at-fault driver pay for damages out-of-pocket, make sure you understand the full picture before you accept the deal.

When to consider an out-of-pocket payment

An out-of-pocket payment is a useful, but sometimes risky, tool for saving some money without involving your insurance provider. While the final decision will ultimately be up to you, there are a few situations where an out-of-pocket payment is the strongest option.

An inexpensive, single-car accident

If an accident only involves one car, you could be better off paying for the damage from your personal accounts. For example, if a tree branch falls on your parked car or you accidentally sideswipe the edge of your garage, consider getting a repair quote before you file a claim.
Most single-car accidents will be covered by comprehensive coverage, but the deductibles in this category can range from a few hundred dollars to over a thousand—depending on your provider. If the damage seems less than your deductible, you might want to pay out-of-pocket.
Importantly, if your accident involves an injury, then you should immediately involve your insurance company.

A very minor two-car accident

If you’ve gotten into a minor accident with another car—maybe scratched some paint or gently bumped a mirror—you may want to consider an out-of-pocket payment. Although, this situation can be riskier than the single-car alternative.
The downside of an out-of-pocket payment is that there is no signed contract or record of the accident—to your insurer at least. So if you’re inclined to go the out-of-pocket route, be sure that you can trust the at-fault driver to pay, even if the damages end up costing more than expected.
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When to decline an out-of-pocket payment

While there are some situations where you can generally feel safe making or allowing an out-of-pocket payment, there are also events where this option should be ignored entirely. In the following situations, you should call your insurance provider immediately.

Accidents where someone is injured

If any driver or passenger (including you) is injured due to an accident, you should involve your insurer as soon as possible. This step is important for documenting the accident and ensuring that your provider will assist you if the injuries are serious or life-threatening.
In short, hospital bills can set you back a lot of money. And, even if someone says they’re okay after an accident, they can return for compensation down the line if complications emerge. 

Accidents resulting in expensive damage

It can be hard to tell how expensive damages will be after an accident. But, if you have a feeling—even a small one—that the repair costs will be high, you should call your provider. Repairs tend to be pricier for:
  • Damage to the front and rear bumpers
  • Any damage underneath the vehicle
  • Large, seemingly cosmetic, body damage
Key Takeaway Out-of-pocket payments can sometimes help you save money, but there are many more instances where this option should be ignored. If someone is injured or the vehicle damage looks expensive, you should promptly involve your provider.

Red flags to watch out for

When another driver offers to pay for your damages out-of-pocket, it’s important to think carefully before accepting this offer. If you feel uncomfortable or uncertain about whether you're making the right call, you should be on the lookout for certain red flags.

The at-fault driver mentions something illegal 

Illegal can be a harsh word, but if an at-fault driver wants you to allow out-of-pocket payment, saying yes could implicate you in a violation. Here are some common illegal reasons for someone to suggest out-of-pocket payment.
  • The driver doesn’t have any insurance or doesn’t have enough insurance to meet the state’s minimum requirements
  • The driver doesn’t have a driver’s license or cannot legally drive for any reason
  • The vehicle involved in the accident does not belong to that driver

The at-fault driver is hesitant to give you their contact information

Sometimes damage to a vehicle can cost more than you initially expect. One way to avoid paying a higher price is to exchange contact information with the at-fault driver. If someone is wary about exchanging information or claims that they’ll pay you later, it’s probably a good idea to call your insurance provider instead.

The at-fault driver insists on paying the cost before you receive an estimate

Estimates are a great way to ensure you’re getting the right deal after an accident, but it can sometimes be challenging to come up with a payment option after receiving the estimate.
There are plenty of reasons an at-fault driver would argue against getting an estimate—they don’t want to pay later, they know more about the damage than you do—but it’s unlikely that any of these reasons would work in your favor. To avoid the hassle, get your insurer involved in the situation.
Key Takeaway If you get hit by another driver and they offer to pay for the damages without involving insurance, be on the lookout for any ulterior (or illegal) motives.

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In the case of a minor accident, it is not illegal to pay for damages out-of-pocket. However, unless you created a signed release between the two parties, you can still be sued down the line if someone feels as though their compensation was lacking.
If there is no signed documentation between the two parties, someone can still request additional compensation after you’ve already settled the payment. This is especially true for medical compensation, where injury claims can result in extremely high costs for whoever caused the accident.

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