Should you always make a claim?
If only it was as easy to control life as in the soap operas where, no matter what happens, the lead characters always walk away unscathed. Yet, when “stuff” happens to ordinary people, there are always consequences. Take one of the clauses in auto insurance policies — the one in bigger print saying, “if you are involved in an accident involving injury or property damage, notify your insurance company immediately”. This is followed by warnings that failure to pass on the glad tidings of your latest mishap will allow the insurer to refuse to honor any claim arising from it. Some even say they will cancel the policy altogether.
This is designed to make you afraid if you are tempted not to report an accident. It’s like an urban legend. You are this driver who carelessly bends the fender of an old car driven by a young kid. It was not his fault. He does not want the accident reported. You are happy to pay over $100 for the repairs and drive on. But this was a valuable vintage car and it’s going to cost a mint to repair the damage you caused. . . and then there’s the body in the trunk!
Well put the myths to one side and take a hard look at the facts. When you negotiate your auto policy, you accept deductibles. This is “self-insurance”. You pay for the damage you cause out of your own pocket. Suppose your latest bending is clearly minor and will be covered by the deductible (with the largest deductible, you can bury the body in the trunk and have change). You may be better off paying for the repairs and forgetting to report it to your insurer.
If you ask insurers why they want this information, they will tell you it’s part of their anti-fraud measures. When some people have a minor accident, they pay for the damage to the other car but do not repair their own. If there’s a second accident, they claim all the damage to their car as one accident. So this is insurers protecting themselves against dishonesty.
Ignoring the fraud element, it’s standard for states to have laws creating criminal offenses for failing to stop and exchange details with the other driver(s). Everyone is entitled to know who is involved in a traffic accident so that insurance claims can be made. But no laws require the drivers to notify their insurance companies. If people decide to deal with the accident themselves, that’s their lookout. No laws are needed to protect the insurers against loss. Once you break the contract, you cannot claim on the policy. Is there a problem with this? Well, some injuries only become apparent later.
What happens if you report every accident? You pay out on the deductibles and the insurer adds the details of the (latest) accident to your record. But insurers share information on their drivers. So, when it comes round to renewal, your current insurer could up the premium because you are a “bad” risk. Other companies give high quotes because they know about your “bad” accident record. Of course insurers will deny any link between reporting accidents without a claim and an increase in the premiums. But you should always look for the companies that give a guarantee in their policy not to increase the premium if you do report.
Finally, some companies have terms allowing them to refuse renewal of your policy if you are “at fault” in two or more accidents in a year. The state insurance departments and commissioners report an increase in the number of complaints that insurers are deciding their drivers are “at fault” and refusing renewal. While the complaint is being investigated, it often happens that no other insurer will give you cover.
It’s your decision whether to break the term in your contract of insurance. If you decide to take the risk, always get everyone else involved in the accident to sign a waiver when they accept payment from you.
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