In order to avoid higher auto insurance premiums following an auto accident, it is a fairly common practice for the at-fault driver to offer to pay for the damage without reporting the accident to his or her insurance company. But is this a good idea? In some situations, it may be to your benefit; there are others in which you should never try to bypass the insurer; and still others when you need to carefully assess the circumstances, the other driver, and the terms of your insurance policy.
If the accident is a very small one involving only your car, with no injuries, and the cost to repair it is less, or only slightly more than your deductible, then by all means go ahead and take care of it yourself. This could save you money in premiums in the long run, since insurance companies will typically add a surcharge to your rate for the next three years if you report the accident.
In the situation where the accident involved another vehicle, and the damage was minimal with no injuries, in some cases it is to your benefit to offer to pay for the damage yourself. But there are risks involved. If the other driver is a total stranger to you, you cannot be sure they will stick by the agreement, that the estimates are reasonable and legitimate, or that they won’t later decide that they are injured or get the idea that they could take advantage of the situation by later reporting the accident and blaming you for damage that was already there before the accident occurred. While paying out-of-pocket could save you money, it could also open a can of worms that you will later regret. So unless you know the other driver or have reason to believe in his or her trustworthiness, you might want to bite the bullet, report the accident, and let your insurance company handle it.
If you have already been involved in another accident for which you were at fault within the last three year period, or if you have a poor driving record and recent traffic violations, the financial stakes are higher, since multiple claims against you will usually cause your policy to be cancelled and force you into high-risk insurance, which is expensive. In this case, it may be much more to your benefit to pay out of pocket.
It is often a good idea to maintain an emergency fund for minor accidents so that you will not be constrained by financial challenges when deciding on whether or not to pay yourself and avoid premium surcharges. Otherwise, if you don’t have the cash available now, you may have no choice but to let your insurer pay and deal with the penalties, which may be higher but are spread over time.
On the other hand, there are certain accidents where you absolutely must report. Any accident involving a bodily injury, however minor, has to be reported by law. You are also required to report an accident that has resulted in substantial property damage. Failing to report an accident in either of these situations could have serious consequences, including a denial of the claim by your insurance company, additional premiums, and the possibility that your insurance company will not indemnify you by defending you should a law suit arise.
In any case, you should be familiar with the terms of your insurance policy. Read it carefully, and ask your agent if anything is unclear. Know what your deductible is, and know your insurer’s surcharge threshold. Do the math and determine if and by how much your premiums are likely to increase if you report the accident. Consider the other driver. Is it your next door neighbor and good friend whom you know to be an upstanding person, or is it a total stranger about whom you know nothing? Consider carefully the possible risks vs. benefits, and you should be able to make an informed decision based on facts.