What is the Auto Insurance “Claim Game?”
Auto collision repair is often expensive, so many drivers assume they should file an insurance claim after any accident. But is it always the best option? Which types of damage cost more in the long run when you file a claim with your insurance company, and which types should you let them pay for? This article will help you answer the big question you should ask after any vehicle accident: “Should I file an insurance claim or pay out of pocket?”
Understanding the Rules of the Game
Insurance is like a gambling game, one in which insurance companies get to set the house rules. Like any for-profit business, they establish rules that not only provide an important service to drivers, but also create profit for the company. Auto insurance is a great deal when you have frame and engine damage after an accident because costs can run very high for these types of repairs. In these cases, you usually come out ahead by filing a claim, letting the insurance company pay for the damage, then shouldering the resulting, higher monthly premiums for a few years.
But filing an insurance claim for lesser types of damage can work more to the insurance company’s advantage than to yours. If your vehicle only has $600 of damage to the body, and your insurance deductible is $500, they’ll only pay $100 toward repairs, and you’ll pay the rest out of pocket. “That still saves me $100,” you might say. Not necessarily. It’s very common for insurance providers to raise monthly rates for drivers after an accident. If your rates go up $10 a month for next 36 months*, you’ll end up paying more in the long run.
This is part of what we mean when we talk about the “claim game.” Is the insurance company taking advantage of you when you file a claim for minor damage? No, it’s just how the business has to function in order for these companies to turn a profit and keep making their services available. But it does mean that you should explore different options when you find yourself in this position to make sure you’re coming out on top in the long term.
Cutting Red Tape and Controlling Repair Costs
The least convenient part of an auto insurance claim for many people is that it adds extra steps to the repair process. Estimates have to be performed according to specific guidelines, and extra paperwork has to be filled out. Furthermore, you lose all control over costs because insurance companies pay preset amounts that have been contracted with repair shops. This is the other side of the claim game; you find yourself caught in a business matrix that adds time and red tape to the repair process.
But when you pay out of pocket, you have much more control over costs, and it often takes less time to get your vehicle back on the road. When there is no damage to the engine or frame of your vehicle, you may be able to save hundreds of dollars by seeking out a minor collision repair shop. APR falls into this category because we simply don’t work on major collision damage. While most shops invest in expensive equipment for frame bending and engine repair, we have chosen instead to specialize in the cosmetic end of the spectrum. Because we don’t have to make payments on the big equipment, we can charge considerably less for most repairs than a traditional, full-service shop.
Also, we can usually offer you some lower-cost repair options if you pay out of pocket. When insurance companies pay for the repair, they require that it’s done in certain ways, but when you’re in control, you can opt for less expensive repair methods and paint techniques. For older, less pristine vehicles, these methods may be all you need to bring the vehicle back to its former glory, and they may cost significantly less than full-scale, insurance-certified body shop work.
Winning the Claim Game
Winning the auto insurance claim game begins with looking over your policy and talking to your agent about how a claim may affect your monthly premium rates. Most agents are happy to disclose this information and make sure you get best deal for you situation. And, yes, it’s safe to talk to the agent about this. From the insurance company’s standpoint, if no claim is filed, no accident happened (unless you were ticketed for the accident, in which case the citation may cast its own shadow on your rates).
If it makes financial sense for you to pay out of pocket, you’ll probably find the repair process to be very quick and painless because there’s no third party involved in the procedure; just you and your body shop. And after the disorienting experience of having an auto accident, it can do a lot for your mindset to have a sense of control over the situation.
*These numbers are arbitrary and for demonstration purposes only. Rate increases and the duration of those increases vary from one claim to the next based on a variety of factors.