Filing an auto insurance claim can seem like a straightforward step after an accident, but knowing when not to file can be just as crucial. Many assume that only major claims affect premiums, but even minor claims can lead to increased rates.

In fact, it’s often the reporting of an incident, rather than the insurance claim itself, that triggers higher premiums. Insurers frequently adjust rates simply because an accident was reported, regardless of the severity.

This article explores the pros and cons of filing a claim, clears up some common misconceptions, and offers practical advice for various situations to help you make a smart decision.

How Small Claims Can Impact Your Insurance Rates 

It may come as a surprise that even small claims can raise your rates, as insurers view any accident report as an added risk. Understanding this potential impact can help you make a well-informed choice about whether a car insurance claim is worthwhile.

How Insurers Calculate Risk

Insurance companies set premiums based on several risk factors, including driving record, frequency of claims, and accident reports. Even minor accidents can signal a higher risk level to insurers, leading to potential rate increases to cover anticipated future claims.

Why Small Claims Matter

Contrary to popular belief, small claims—or even reports of minor car accidents—can influence premiums. Insurers tend to factor any reported incident into premium calculations, even if it’s minor or not your fault. Knowing that small claims can increase your premiums helps in making more strategic decisions about when it’s best to avoid filing a claim.

Don’t Make This Mistake

There’s an important distinction between merely reporting an accident and filing an actual claim. Sometimes, just notifying your insurer of an incident (due to police involvement or third-party reports) can lead to a premium hike.

If the insurer is already aware of the accident, not filing a claim might not prevent a rate increase. In these cases, filing a claim could actually be beneficial, as the rate impact is already in place, and the claim can help cover repair or medical costs.

When Not to File an Auto Insurance Claim

For some situations, covering repair costs out-of-pocket directly at a repair shop rather than filing a claim can be advantageous, especially if the accident hasn’t been reported or the insurer is not yet aware.

Here are scenarios where forgoing a claim could save you more in the long run.

#1 Repairs Cost Less than or Near Your Deductible

If your repair costs are close to or just slightly over your deductible, filing a claim may not be worth the potential premium increase.

For instance, if your repair estimate is $1,200 and your deductible is $1,000, you’d only receive $200 in coverage—but might face a premium hike that costs much more over time. In these cases, paying out-of-pocket could be a wiser choice, provided the accident hasn’t been reported.

#2 Minor Cosmetic Damage

Filing claims for minor cosmetic damage, like small dents or scratches, can raise premiums unnecessarily. Such claims can also show up on vehicle history reports (e.g., Carfax), potentially lowering the car’s resale value more than the cost of the damage itself. In most cases, it’s more cost-effective to pay for minor cosmetic repairs yourself to avoid long-term financial impact.

#3 Risk of Losing Your No-Claims Bonus

Many insurers offer no-claims bonuses or discounts to policyholders with claim-free records, which can save $200-$500 annually. Losing this bonus due to a small claim can have a greater long-term cost than covering a minor repair yourself. This bonus also helps maintain low rates when switching insurers. By avoiding small claims, you can keep this discount intact, especially if the insurer isn’t aware of the incident.

The Hidden Costs of Filing Small Claims

Deductibles on Multiple Claims: Each accident requires its own deductible, which can add up quickly. For frequent minor incidents, paying out-of-pocket for repairs could save money and help avoid additional rate increases.

Risk of Policy Cancellation or Non-Renewal: Filing frequent small claims can make you appear high-risk to insurers, potentially leading to policy cancellation or non-renewal. Even minor claims, if frequent, indicate a higher risk level, which may affect your ability to retain coverage.

The Hassle Factor: Small claims can involve considerable paperwork, inspections, and follow-up, which can be time-consuming. For minor damage, consider if the effort involved is worth the potential payout and rate increase.

When You Should Definitely File a Claim

While there are cases where avoiding a claim is beneficial, some situations require filing to ensure adequate financial and legal protection.

Major Accidents or Costly Repairs: When repair costs far exceed your deductible, filing a claim is usually the best route. Significant damage is what insurance is meant to cover, so in these cases, a claim is likely worthwhile.

Injuries or Medical Expenses: If anyone involved is injured, filing a claim is essential. Medical expenses can add up quickly, and insurance coverage can help manage these costs.

The Other Driver is at Fault: If another driver is responsible, filing a claim helps ensure their insurance covers the damages. Even if your insurance is impacted, it’s important to hold the at-fault party accountable.

Liability Concerns: If there’s a chance of a lawsuit or liability, it’s crucial to file a claim for legal protection. Your insurance policy provides liability coverage, and filing safeguards you financially against potential claims from others.

Conclusion

When deciding whether to file an auto insurance claim, consider the long-term financial impact rather than focusing solely on immediate benefits. Not all accidents require claims, especially if they’re minor and can be managed without involving insurance. Evaluate your specific situation carefully, weigh the costs of repairs against potential premium increases, and don’t hesitate to consult your insurance agent for guidance.

For smaller repairs, our team in Denver offers expert auto body solutions to help you keep costs low and your vehicle in great shape—without affecting your premiums.