Paying Out of Pocket After a Car Accident: When You Should Do It

Paying Out of Pocket After a Car Accident: When You Should Do It

If you're involved in a minor accident, you may consider skipping making a claim to your insurance policy and paying for the damage out of pocket instead. If another driver is at fault, they may offer to give you cash instead of letting you file a liability claim, risking increased insurance rates.

With some types of accidents, it's OK to leave your insurer out of the equation and pay out of pocket. But there are factors to consider before doing so, including how many people were involved, how severe the accident was, and legal requirements in your area.

When you may pay out of pocket

If you get into an accident and file a claim, there's a chance your insurance company will increase your premiums — costing you hundreds if not thousands over the coming years. If you find yourself in the following situations, think twice before calling them up.

An inexpensive, single-car accident

Some accidents only involve one car — for instance, you've bumped into your kid's basketball hoop and it's left a dent in your door. Or, a branch fell on your car and cracked your windshield. These types of claims are handled through your collision or comprehensive insurance.

Both coverages come with deductibles that can range from $50 all the way up to $2,000. If the cost to repair your car will cost less than your deductible, or even just slightly more, you should handle the repairs out of pocket.

For example, if the damage to your car costs $300 to fix and the deductible is $200, you would save $100 by filing a claim. But your insurance company may decide to raise your rates, costing you much more than $100 in the long run.

If you decide to pay for the damage yourself, make sure your estimate of the damage is accurate. You won't be able to file a claim later if you find out the bill is much higher than expected. That's because insurance companies require drivers to report accidents and submit claims within a certain time frame. Check your policy for details.

You don't need to report a car accident if you're the only person involved in the accident, no one is injured and you can pay for the medical bills yourself.

If you hit a pedestrian however, that always needs to be reported.

A very minor two-car accident

If you're in a car accident with one other driver and the damage is minimal, you can agree to not involve the car insurance companies. Both drivers can avoid insurance rate increases. But we only advise going this route if you have reason to trust that the other driver won't change their mind.

Unless you know the other driver or have reason to trust them, we recommend you call your insurance company even with minor two-car accidents.

Call your insurance company in these cases

Some accidents need to be reported to the insurance company, no matter what.

Accidents where someone else is injured

If you're in a car accident and another driver or passenger is injured, you must report the accident even if the injuries are minor. Medical expenses are costly no matter where you go in the U.S., and the other person may need to file a claim with your insurance company.

How much you need to pay depends on who was at fault, the degree of fault and your state laws.

  • For example, If you live in a state like Missouri, the amount you pay is proportional to the amount you were at fault.
  • On the other hand, if you're found as less than 50% at fault in New Jersey, you do not have to pay anything.

You're best protected if you report the accident to your insurer (and the police, if necessary) in case you or the other driver needs to file a claim. You've spent a lot of time and money finding the best car insurance company, so you'll want their support when you need them the most.

Accidents where the damage is costly

Whether the accident involves one or multiple cars, if there's a lot of damage, you must report it to your insurance company. For example, you drove into a building and no one is injured — there's probably a lot of damage involved. Odds are, someone will seek payment from you.

Bailey is a Research Analyst at ValuePenguin, covering insurance. He graduated from Occidental College with a B.A. in Mathematics and a minor in Computer Science. Bailey's analysis of the insurance industry and driver behaviors has been featured by CNBC, the Houston Chronicle and the National Transportation Bureau Safety Board.

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.