Can Making a Claim Cost You Cheap Auto Insurance?
You buy cheap auto insurance to keep more money in your pocket. When you are in an accident, you may not think twice about filing a claim. After all, you don't want to pay out all you have saved by handling the repairs out of your savings. But did you know that filing a claim can take away any future savings you might have received?
According to an article from Forbes.com, rates can rise as much as 40 percent on average if you file a claim. This is not necessarily an expensive claim that costs thousands upon thousands of dollars. As little as a $2,000 claim can raise your rates.
This is just the average. Depending on where you live, you might end up paying even more. The end result is that you will pay back that claim quickly if you end up paying out a few hundreds of dollars each year extra in your premiums.
Should You Avoid Making a Claim?
You read these statistics and you may wonder if you should avoid making a claim. Should you not get minor fender-benders repaired?
Obviously, if your car isn't drivable or safe, you will need to have it repaired. The issue becomes more about who is going to pay. You may find that it makes better financial sense to pay out of a savings account for the repairs rather than filing a claim and paying increased monthly premiums for several months or even years. If you don't get your insurance company involved, minor repairs won't affect your rates unless you received a ticket for the accident.
Another thing to consider is the cost of repairs. Instead of just taking it to one body repair company and getting an estimate, shop around to find out who has the lowest price. Reduce the amount of the claim and it may not count as much against your future premiums.
Considering the Cost
Experts say that new rates after a claim often stay in place for three to five years, depending on the car insurance company, before your premiums will go back down. This assumes that you don't have any other claims or tickets in the meantime.
To determine if it is worth using your own money to pay for the repairs, you have to weigh the expense against the increase in premiums for your previously cheap auto insurance. For example, say you are paying $800 a year on car insurance. An increase of $300 a year over five years would bring the total to $1500 extra paid in premiums because of your claim. If the claim is more than that after your deductible is included, it may make sense to file. If the repairs only cost $1000, you will probably benefit from paying for them on your own.
Consider the true cost of filing a claim and understand that you will pay for it every month. Of course, this assumes that you are the at-fault person and that your insurance company is the one paying out. If you are the victim of someone else in an accident, the case will be quite different and your premiums should not be impacted in the same way.