Is Filing a Car Insurance Claim Always the Right Move?

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Car insurance is intended to protect the policyholder against any covered losses. So, when filing a car insurance claim for a covered event, the policyholder can rest assured that any resulting losses will be covered by the insurance company.
Conventional wisdom says you should always file a car insurance claim after an accident or covered event, in order to cover any losses or damages.
That’s what your car insurance is there for—so you don’t need to pay hundreds or thousands of dollars out of pocket. But sometimes, NOT filing a car insurance claim is actually in your best interest.
A person taking a photo of an accident for a car insurance claim
In some scenarios, it’s not in your best interest to file a car insurance claim.

Why it might be better not to file a car insurance claim

In some situations, policyholders might decide not to file a car insurance claim, even if the resulting damages would be paid for by the insurer. Instead, policyholders decided to pay the damages themselves, out of pocket, to avoid losing money in the long run.
In these cases, when a car insurance claim is filed, insurance companies will pay out very little to cover damages. This is because the policyholder is responsible for covering their deductible first.
Car insurance premiums typically go up after any type of claim. So make sure if you’re filing a claim, the costs are truly worth it.

A costly scenario

A scenario shared by The Ascent explains why it isn’t always best to file a car insurance claim when an accident occurs.
In this hypothetical scenario, a driver reverses and hits a neighbour’s mailbox, causing $100 in damage to the mailbox and $1,200 in damage to their vehicle. As this scenario is covered under the driver’s insurance, a car insurance claim would cover the damages to the mailbox and $200 in repairs to the damaged car.
This is because the policyholder is required to pay a $1,000 deductible before the insurer agrees to cover repairs, the insurance company ends up paying only $300, while the driver has to pay $1,000 out of pocket.
The driver also ends up with an at-fault accident on their record, since they filed a car insurance claim to report it.

Why car insurance premiums go up after making a claim

Since the driver in this hypothetical accident reported the event and made an insurance claim, their insurance premiums increased. Why?
Because the driver now has an at-fault accident on their record, causing their premiums to rise significantly. Insurance companies now see this driver as a higher risk. The driver may also lose any benefits or discounts on their insurance they received from being considered a no-claims or safe driver.
The rise in insurance premiums will far outweigh the $300 the insurance company paid out for the initial claim, meaning the driver is now out $1,000 from their deductible, and is also stuck paying an increased amount for their car insurance.
Ultimately, car owners should weigh the cost of covering damages from an accident out of pocket versus how much insurance will cover if a claim is filed.
If the cost of increased premiums and your deductible is greater than the cost of minor damages incurred from an accident, filing a car insurance claim may not be in your best interest.

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