When to Phone in a Fender Bender
Filing a claim for minor damage could be a second accident.
By Mark Solheim, Senior Editor
From Kiplinger's Personal Finance magazine, March 2005
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You're backing out of a parking spot when all of a sudden you hear a crunch. Turns out you've just introduced your rear bumper to a lamppost (which emerged from the collision unscathed). You're worried that filing an insurance claim will boost your rates. Do you report the damage?
Like so many other things in life, there's no one-size-fits-all answer. But the answers to the following questions can help you decide what to do, whether it's a scrape with the garage wall or a crash with another vehicle.
Does your policy require it? State Farm and Allstate, which together represent about a third of car-insurance policyholders, say that the decision to report an accident is up to you -- their policies don't demand it. That's Progressive's take, too. On the other hand, USAA, which writes policies for the military and their families, requires that policyholders report all accidents. In some cases, explains Paul Berry, a USAA spokesman, you could be missing damage that needs to be repaired.
Is someone else involved? Even if the policy isn't explicit, insurers universally agree that when you hit someone else's vehicle or property, you should fess up. "If you get into an accident with another driver or, God forbid, a pedestrian -- even if he doesn't appear to be hurt -- I'd report that," says Jeanne Salvatore of the Insurance Information Institute. "A week later, he might sue you." And if your insurance company has to protect you against a lawsuit, it's going to want to know about it. "If you're in an accident that involves another person or another person's property and you report it, it helps us protect you from future litigation," adds Berry.
What's your deductible? If you answered no to the first two questions and the damage is less than your deductible (don't underestimate the high cost of repairs these days), you may be better off keeping your insurer out of it. In fact, it's often a sound financial decision to hike your deductible and plan on paying for the small stuff out of pocket. Increasing your collision deductible from $200 to $1,000 can trim your premium by 40%. If you set aside the savings, fixing a fender bender won't make a blip in your budget.
How's your driving record? Scores of factors determine the insurance rate you pay, but one biggie is how often you've been in an accident. In general, insurers increase your premium after each claim above a specific dollar amount (and, again, the percentage varies depending on your insurer's experience with similar policyholders). For example, State Farm increases premiums after an accident that costs the company $750 or more. But if you have been accident-free with the company for at least nine years, you get a reprieve. Progressive forgives policyholders for any at-fault accident for which it pays less than $400.
If you think your accident will put you in the rate-hike camp, think about paying for the repairs yourself this time around. Accidents you cause generally stay on your record for three years and will probably prevent you from getting a lower rate with another insurer. But if the accident is not your fault, you should have no worries -- and no rate hikes. Report it to your insurer.
--Research: Jessica Anderson