When You Should (and Should Not) File an Auto Insurance Claim

Car insurance is a funny thing. You pay a small fortune to get it and keep it. Then, if you have the blatant audacity to actually file a claim, the company either increases your premiums or cancels you altogether. OK, that may be a bit extreme, but you get my point.

While the world of insurance can at times be so confusing as to be maddening, going without basic automobile coverage is simply not an option. The financial risk is just too great. But there are some things you can do to make sure you don’t stand out to the company as an intolerable risk.

You should file an auto insurance claim if:

There are injuries, even minor ones. It’s crucial to report the incident to your insurer to ensure your coverage applies, preventing unexpected bills and safeguarding you from potential lawsuits by injured drivers.

Another driver is involved. Contact your insurance company whenever you’re in a crash with another driver, especially when fault isn’t clear. Reporting the incident to your insurer helps make sure the blame is assigned fairly and shields you from excessive liability.

There is damage to vehicles or property. Insurance is there to help you with costs when things get damaged, so you don’t have to pay a big lump sum. That’s why you pay monthly premiums — so you don’t have to fork over lots of money if your vehicle needs repairs.

You shouldn’t file an auto insurance claim if:

You are the only person involved. Don’t file. If the incident is your fault and does not involve injuries, not telling your insurance company will help protect your premium. Your state may require that accidents involving property damage beyond a certain dollar amount must be reported to its department of motor vehicles. Of course you must do that if you’ve crossed the legal threshold. But if the damages are less than, say, $1,000 and you can swing it, paying out of pocket will be cheaper than facing increased premiums for years to come.

Only a small amount of damage. Even if you have collision coverage in your car insurance, you might decide not to file a claim if your car has only minor damage. If your deductible is higher than the repair cost, you’ll end up paying for it yourself, and it could make your monthly premium go up. For example, if you scrape your car in a parking garage and your deductible is $500 while the repairs are only $450, you’ll have to pay the whole amount, and any claim you make will affect your record.

Here are a few additional factors that could lead to a premium increase if you were to file a claim:

If it’s your fault. If you’re blamed for the accident, your insurance rates could increase because the insurance company sees you as a higher risk for making claims.

If your claim is for extensive damage or big medical costs. If you make the insurance company pay a lot, they’re going to raise your rates to make up for it.

If you make a number of claims in a short period of time. Just like when you file an expensive claim, making multiple claims can make your future insurance costs go up. Your claims history, which is like your insurance report card, sticks with you for at least three years, even if you switch to a different insurance company.

If yours is a no-fault state. In no-fault states, any incident may cost the insurance company, which means they might raise your rates if you make a claim, even if it wasn’t your fault. These 12 plus Puerto Rico are U.S. no-fault states: Florida, Michigan, New York, New Jersey, Pennsylvania, Hawaii, Kansas, Kentucky, Massachusetts, Minnesota, North Dakota and Utah.

One last thing: Driving without insurance might seem like a way to avoid higher premiums, but it’s not a good idea. If you get caught or cause an accident, it could cost you $5,000 or more. If your monthly insurance costs are too high, consider getting quotes from different companies to see if you have better options.