Insurance is a great way to have the peace of mind of being covered if the unthinkable happens. Most drivers would not be able or find it very difficult to pay for a new car on their own if they still owed payments on a totaled car or lost its trade-in value. While insurance is a great thing to have when a car is wrecked, it’s important to carefully consider whether it’s actually worth using it before making a smaller claim.
Cost vs Deductible
Most drivers have deductibles of $250, $500, or $1,000. If a claim falls under the deductible amount, the driver is responsible for it. The insurance company only picks up the amount that goes over the deductible. It may seem like it makes sense to file a claim any time it’s more than the deductible amount. For example, if the repair bill is $1,050 and the driver has a $1,000 deductible, that’s $50 the driver could avoid paying. However, filing for that $50 may not always be worth it. First, there’s the hassle of filing the claim. Second, that claim may end up costing the driver more than $50 as described below.
Premiums Increase When a Claim is Filed
Insurance companies have found that, on average, drivers who have previously filed a claim are more likely to file another. Because claims cut into profits, the insurance companies raise the premiums on those drivers to offset the additional expenses. According to NBC, the average premium increase for a driver making a claim when they were at fault in the accident is 38 percent. A second claim by an at fault driver nearly doubles their premium. For other types of claims, there is still an increase, but not as severe. For example, the average premium increase after a hail damage claim is just two percent.
Possibility of Losing Coverage
Insurance companies are under no obligation to keep covering drivers who create a high risk to the insurance company. Most drivers only rarely file claims, and a driver who repeatedly files claims will be flagged as either someone who is a poor driver or who is making fraudulent claims. Using insurance beyond its intended purpose of covering the rare claim that would be financially crippling to pay for out of pocket may result in a policy not being renewed and having difficulty finding a new insurer.
Opportunity to Finance Claims
One important thing to remember is that the choice isn’t limited to having insurance pay or paying cash on the spot. Various financing options are available to help spread the costs over time. Colorado Auto Body offers in-house financing and also accepts all major credit cards. The odds of finding a low interest rate, low monthly payments, and maybe even a zero percent APR introductory offer are good. Especially if the insurance company will only be paying for a small portion of the repair, it may be cheaper in the long run to pay a small amount in financing charges to avoid the possibility of increased insurance costs. The credit application process can also be completed in minutes as opposed to weeks of going back and forth with the insurance company.
How to Decide
At the end of the day, the decision whether to make a claim is largely a simple math problem of how much the insurance company would be paying versus the possibility of increased insurance costs and the value of the time dealing with the insurance company. To make a well-informed decision, talk to Colorado Auto Body as soon as possible about the potential repair costs and possible payment options.
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