When you are involved in a car accident or your car is damaged in some way, your first instinct might be to contact your insurance company to report a claim. After all, this is what you pay insurance premiums for, right? Not necessarily. You may want to reconsider before you pick up the phone to report a potential claim.
Insurance companies report all claim payments to a national database known as the Comprehensive Loss Underwriting Exchange, or C.L.U.E. In turn, the same system is used by insurers to review the loss history of a prospective client.
Whether the insurance company paid one dollar or one million dollars, it will show on the C.L.U.E. database and could affect your eligibility with an insurer as well as your auto insurance rates overall. Insurers consider claims frequency as well as the amount paid, and several small claims could have the same impact as one or two larger ones.
There are basically two types of auto insurance claims – property and liability. Property claims include any type of physical damage to your own vehicle. Claims involving property damage or personal injury caused by your vehicle would be considered liability claims.
With this in mind, there are several things you should consider when deciding whether or not to report a claim. Each situation or accident is unique and therefore special consideration should be taken each time. Use the following as a guideline, but always contact your agent or insurance company when in doubt.
1. Property damage claims – Is it worth it?
When a potential claim involves only damage to your own vehicle, you need to consider the cost of the repair, the amount of your deductible, and how it will affect your future insurability. If you have no prior claims on your record and report a small claim, your insurer may or may not impose a penalty.
But what would happen if later on you have a much larger claim that you are unable to absorb financially, and then within the year, you have another large claim? You now have three claims within a short timeframe. Your insurance company could potentially cancel you for claims frequency. Further, you are required to disclose the fact that you were cancelled and the reason for the cancellation to insurers with whom you are applying for coverage.
If you had absorbed the first small claim without reporting it, you could have saved yourself a lot of headaches – and money – in the long run. The following are examples of property damage claims you might not want to report.
Don’t report: Claims below your deductible.
Claims involving damage to your own vehicle need not be reported if the damage is below your deductible. If the claim is for property damage only, and no other person or vehicle was involved, you should first get an estimate of repair. If the claim is less than your deductible, you already know there is no point in reporting it because there would be no coverage.
Don’t report: Small claims you can absorb.
Backing out of a parking spot at the mall, you scratch your bumper on a light post. The repair estimate for your bumper is $585 and you have a $500 collision deductible. You are entitled to payment of $85, but before reporting such a small claim, you should consider whether or not it is worth the potential consequences.
Your car is broken into and your entire CD collection is stolen. The only damage to your car is the door lock, with an estimate of $475 for repair. Your CD collection was worth $550. If you have a $500 comprehensive deductible, the damage to your vehicle would not be covered. And, unless your policy is endorsed, there would be no coverage for your CD collection because it is not part of the vehicle.
There may be coverage for the CD’s under your homeowners or renter’s policy, but the deductible of that policy would also apply.
2. Liability claims – Is there potential for injury?
When another party is involved in any type of accident that was caused by you, this is covered under the liability portion of your policy. Most liability claims should be reported to your insurance company, even if the damage is very minimal. The following are examples of the two types of liability claims.
Property damage liability
Don’t report: Small claims involving only property damage and no personal injury.
In the instance used above involving the light post, assume the light post was damaged. This would be a covered claim under the property damage liability and the deductible would not apply. But if the damage is minimal, you may want to consider paying this yourself to avoid having a claim on your record.
Don’t report: Minor accidents that cause minimal damage.
You back into an unoccupied parked car, causing very minimal damage. You might consider paying for the damages out-of-pocket, since no person was involved and there is no chance of injury.
Bodily injury liability
Any claim, regardless of fault, should be reported when you are involved in an accident involving another person that could later make an injury claim, even if it is a very low-impact collision and extremely unlikely there is an injury. This includes occupants of your own vehicle, other than family members, whether or not another vehicle was not involved.
Always report: Any claim involving potential for injury.
Attempting to stop at a traffic light, you rear-end another vehicle going only 5 MPH. Both you and the other driver assess the damage and conclude that the damage is very minimal and possibly not worth reporting to your insurance company since no one was injured.
Contact your agent or insurance company to notify them of the incident. Explain the details of the accident; provide the date, time and location of the accident, the make & model of the other vehicle, and the name of the person driving the vehicle as well as any passengers.
You can still pay for the repairs yourself to avoid having a claim on your record, but at least you have made your insurance company aware of the incident. You never know when this could come back to you. If a few months later, the driver or an occupant of the vehicle suddenly develops a back injury and decides it is from that accident, your insurance company may not be obligated to defend you if you had not reported the claim.
Always report: Claims involving pedestrians, cyclists, or minors.
Backing out of your driveway, a neighborhood kid riding his bicycle zooms behind you before you can stop, and you clip the rear tire, causing him to fall from his bicycle. You stop just in time, and though his bicycle is ruined, the kid doesn’t have a scratch.
Should you offer to buy the kid a new bicycle and forget the whole incident? Never! Always report an accident of any kind involving a pedestrian or cyclist, regardless of who was at fault, and always report any type of incident involving a minor child to your insurance company. Give the details of the incident and the names of any witnesses who saw it happen.
Even if the kid and his parent apologize emphatically and insist the kid was at fault, you should still report it. This type of incident could end up being a legal nightmare and it needs to be documented in order to protect you from potential future litigation. You can still buy the kid a new bike if you wish, and the claim would show up as a $0 payout. But your insurance companywould be aware of the incident, and would be obligated to defend you, should a claim for injury ever be made.
Consider your options carefully before filing a claim
Each and every liability auto claim has its own unique circumstances and careful consideration should be made before deciding not to report it to your insurer. If you have any doubt whatsoever, you should report it. It’s always better to be safe than sorry.
In the case examples used above that involved no potential for injury, it might be a good idea to contact your agent and explain what happened, tell them you intend to pay for the damages yourself, but that you just want the incident documented in your personal file. You can never be too careful.
Courtesy: e-wisdom.com