Picture this: your morning has been a complete disaster. You woke up late, one of the kids is sick, the dog ran off, you forgot to pick up the dry cleaning, and there is a meeting at eight a.m. that you absolutely cannot be late for. This day is only one hour old and it already has been a nightmare. Well, unfortunately, it’s going to get a lot worse.
With all distractions and chaos erupting around you, your mind simply isn’t where it should be. When you finally get the family loaded into the car, you back out of the driveway doing about sixty. Shortly thereafter, you strike the mailbox (a concrete post of a mailbox, that is) and up severely damaging your rear bumper.
Besides helping to contribute to one of the worst days of your life, your accident with the mailbox ends up causing $1000 in damage. Ouch. Thankfully you have full coverage on your car, including collision and comprehensive insurance. So, go ahead and file that claim and let the insurance company pay for it, right? Not so fast. Filing a claim for an at-fault accident (unless in this case you can find a way to prove it was the mailbox’s fault) can end up costing you in the long run, sometimes more than it would take to repair your vehicle out-of-your-own pocket. Here are a few things to consider when deciding to make a small claim.
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Your Deductible
Right off the bat you are going to have to give money to your auto insurance company. Exactly how much depends on what you set for your deductible. Let’s say it was only $250. Using the example from above, that saves you $750. If the deductible is $500, your out-of-pocket costs have been cut in half. If you have a $1000 deductible in this scenario, it would make little sense to file a claim. Pay for the repairs yourself.
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Your Premium Will Go Up
You hand over the money for your deductible, the insurance pays for your vehicle’s repairs, and you go on with your life. Problem solved, right? Unfortunately, you are not done paying for your encounter with that mailbox. After you file a claim, even a small one, your premium will increase. And it will stay at this elevated rate for the next three years. For this example let’s say your annual premium increases a $100. That is an extra $300 in auto insurance costs over the next years.
Your Premium Will Increase Dramatically With A Traffic Ticket
After filing this claim you happen to receive a speeding ticket a month later. This will have a dramatic affect on your insurance premiums. In some cases, you could see your premium double from the base rate you were paying. Not only that, if you file more than one small claim in a short time span and have a few tickets, it is possible your insurance company will drop you. You might be labeled as too risky to insure.
Should You File That Claim?
It depends partially on your deductible and base premium. If you were already paying a low rate and have only a $250 deductible, it might make sense to file the claim. You will save money.
However, if you have a $500 deductible and have a higher premium, you might want to consider paying for the repairs yourself. Added up over the course of the next three years, a $1000 accident could end up costing you much more than a grand. Perhaps even double that amount.
Your driving habits are another important consideration. If you’re the type who sees a speeding ticket now and then, it might advisable to foot the $1000 repair bill yourself. Receiving tickets and filing claims could bump you up to a higher risk category. Of course, higher risk means higher premiums.
Finally, you have to gauge your personal finances. Could you afford to absorb a $1000 financial setback if it saved you money in the long run? Or are you living paycheck to paycheck, and can barely afford the deductible?
No matter how you look at, that lamentable encounter with the mailbox is going to cost you. The question is – how much and for how long? This is something only you can answer; to do so you must review your insurance policy, driving habits, and personal finances. That and try to look over your shoulder next time you back out of the driveway.
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