Should I file a claim with my auto insurance?

January 26, 2012 2:19 PM

Should I file a claim with my auto insurance?

I've had my car and insurance for one year+. Prior to that I owned no car for several years - long enough that I'm essentially a new driver in the eyes of my insurance company.

My insurance company (Pemco) is a small, state agency that prides itself on insuring only the safe drivers. I recently dented and scraped up my car. There was no other car involved; I was just being careless. The cost to repair it will run about $1500, and my deductible is $500.

Some folks have advised me to pay for it out of pocket to avoid both a premium increase and the vulnerability that accompanies driving without any safe driver points. Other folks are advising me to file the claim because that's what insurance is for. I'm not eager to spend the cash, but I have it. Does anyone here have any insights into this dilemma?

posted by MsMartian to travel & transportation (9 answers total)

Pemco is not particularly small and the "only insuring safe drivers" bit is an advertising ploy. I don't think either of those details have anything to do with your question or answer.

An interesting thing to do here is to get insurance quotes from other insurance agencies for renewing your insurance with an accident claim as a way of getting an idea of the impact of having a claim. Progressive's interface, somewhat oddly, allows you to quote multiple "scenarios" of accidents/claim and determine what the impact to your insurance rate is. In my experience, with my driving record, with my credit, my insurance rate approximately doubled when I added an at-fault claim (as an experiment). Hence, in your scenario, I would pay for the damage out of hand, as the increase in insurance rates would have swamped any short-term savings from claiming on the insurance. That said, there are many people that have had at-fault claims without insurance rates increasing substantially. I don't pretend to know how insurance works, so instead, I just get lots of quotes to see what happens under different scenarios.

As a empirical note, a not-at-fault claim caused my insurance rate to go up by about 20%.
posted by saeculorum at 2:29 PM on January 26, 2012 [2 favorites]

Call and ask them.

Many insurance companies let first offenses slide (but not about when claims actually cost them money).

If you don't like the response (increased rates), then you can decide to not file a claim. Also ask how long the claim would be on your record, when/how would your rate recover, and what would happen if there was a second claim?
posted by jpeacock at 2:50 PM on January 26, 2012

The thing about calling them and asking them is that even if they tell you that the accident won't count against you, you'll likely find your rates mysterious increase at your next renewal. I had that happen to me, despite the damage to my car happening while I was two blocks away at a Metafilter meetup, so clearly it was not my fault. I filed the claim, and the next year? Presto, $300 a year rate increase.
posted by jacquilynne at 3:02 PM on January 26, 2012

Seconding not calling outright. I've seen the exact same thing happen to relatives who had otherwise spotless records and decided to pay out-of-pocket. That being said, I had an at-fault claim that did not cause my rate to go up whatsoever (although I had been claim free for the length of my insurance, about five years, so YMMV). Do some research into your policy and check if they have an accident forgiveness clause in your policy. You could also try calling your insurance company as a prospective client and inquire into their policies regarding first claims.
posted by Nightman at 3:33 PM on January 26, 2012

PEMCO has somewhere north of $100 million in written premium. State Farm writes about $52 billion in premium a year and has about 10% of the entire P&C market. The top ten companies represent about 50% of the market. So yes, on that scale, yeah, it's small.

But neither is it a farm mutual or mutual aid society. PEMCO is a Class VIII company, with premium between $100 and $250 million. Class I-III all have less than $5 million. A good rule of thumb is that a well-capitalized insurance company should have somewhere between two and three times as much written premium as it has assets on hand, so PEMCO very likely has something in the neighborhood of $150 million in surplus it can use to pay claims.

In short: PEMCO may not be one of the big boys, but they're far from a minnow. Don't let their size affect your decision here.

But something you should consider is that you probably have a contractual duty to contact your insurance company every time there's a loss that exceeds your deductible. A clause to that effect is part of most personal auto policies. Some require you to call every time there's a loss, even when it's less than your deductible. So, if you don't call this in and you have a claim at some point in the future, should it come out that you had a loss you didn't report, the company will technically have grounds to drop your policy, if not deny the claim outright.

The theory here is that the only way they can tell whether or not you're a good risk is if you're honest about your driving history. Otherwise, they could find themselves with someone who gets in fender benders every other month but either pays for them himself or doesn't fix his car, only to T-bone a school bus and cause a huge loss. If they knew he was getting in all these minor accidents, they'd either have charged a higher premium or canceled his policy. But because he lied, they're stuck with this big loss they didn't plan for.

Something else to remember: insurance companies generally don't mind paying claims they clearly owe,* as long as they've collected the right premium for it. What they don't like is finding out that the risk they've accepted is greater than they thought because the insured didn't tell them everything, meaning they didn't charge enough premium. Most states have laws to the effect that a material misrepresentation by the insured will void coverage, to prevent exactly the scenario I described above.

Just some things to keep in mind. Read your policy.

*Emphasis on the "clearly" there. If there's a dispute about liability or damages, they'll want that worked out to their satisfaction before they pay, and just because you think something is obvious doesn't mean that it is.
posted by valkyryn at 4:00 PM on January 26, 2012

If had a few years of no accidents under my belt I would file the claim. In this case, if it were me, I would just pay it.
posted by brownrd at 4:10 PM on January 26, 2012

Don't call, don't claim. Everything will be reported to underwriting and they will raise your rates or cancel you. Insurance is for catastrophes; what you need here is a revolving credit card. IWAIA/IANYIA
posted by toodleydoodley at 4:37 PM on January 26, 2012 [1 favorite]

Where is the dent and scratch, and how bad is it? And how old is the car? It the car is a few years old and the dent isn't something that will rust, I'd probably just ignore and go on with life. I assume the damage has absolutely no impact on the cars ability to get from point a to point b?

Another idea is to go to a body shop and tell them you don't want to file a claim, and ask what can they do for a repair cheaply? At $1500 for a dent and scratch I assume they are replacing a bumper, or maybe a quarter panel, and painting.

Depending on the size of the dent, and where it is, you could try repairing it yourself and then touching up the paint. It's not rocket science.
posted by COD at 6:34 PM on January 26, 2012

Don't call, don't claim. Everything will be reported to underwriting and they will raise your rates or cancel you.

Not necessarily. I've had several accidents over the past decade--all single-car fender benders--and I reported all of them to my insurance company. I'm still with the same company, and my rates haven't changed a bit.

Think about it. This loss is going to cost the company $1000, plus some nominal amount in loss adjustment expenses. You're probably paying more than that in premium every year. So yes, they'd rather you hadn't had the loss, but they're still making money on you, not only in the long run, but in the short term too.
posted by valkyryn at 5:22 AM on January 27, 2012