When to Use Your Deductible

You should probably pass on filing a claim for small damage like this.

You should probably pass on filing a claim for small damage like this. (image by audiworld.com)

In nearly all claims with your own insurance company, you’ll be obligated to pay a deductible, which represents your financial contribution towards a claim.  The question, “Should I use my deductible for this accident?” goes in hand in hand with the question, “Should I file a claim?”  The answer to those questions will be different for each driver depending on one’s insurance coverage, budget, accident history, and the amount of one’s deductible. Generally speaking, filing a claim will likely cause your rates to increase, so keep in mind the long-term cost of your monthly premiums.*

When filing a claim for an at-fault accident, you might see your rates increase by as much as $50 or even $100 in your monthly premium.  At $50 more per month, you’ll be looking at a $600 per year increase in your insurance costs.  Most insurers will lower a driver’s rates if they make it for three years without an accident or a claim, so you could expect roughly $1,800 in increased insurance costs until your rates come back down.

With a $250, $500, or $1,000 deductible, the financial decision should be clear: $1,800 due to higher rates over the next three years plus the immediate cost of your deductible will likely cost more than paying $2,000 or less out of pocket right now.  Added to the equation is the potential for even higher rates in the event of another accident before three years has passed.

For any given scenario, there are a few determining factors that can help you decide whether or not to file a claim or handle it without your insurer.  Following are a handful of scenarios with some tips on how to choose whether or not to use your deductible.


Single-Vehicle Accident: Cosmetic Damage (Bumped Your Car Into A Wall)

  • Use Your Deductible If:
    • You have a clean driving record with no recent accidents: your rates might not increase by much if you file a claim.
    • If the damage estimate exceeds about $2,000.
    • If you don’t have cash or credit on hand to pay out of pocket right away, and the damage has affected headlights, turn signals, or other components that are required to keep your vehicle compliant with the laws of the road.
  • DON’T Use Your Deductible If:
    • If you were involved in an accident or moving violation within the past three years: your rates might be raised even higher, or your insurer might drop you as a customer.
    • If the damage is less than about $2,000 (most cosmetic-only repair estimates won’t increase by more than 10%).
    • If you have room on a credit card or cash on hand to pay for it and either pay off the credit balance or save up again over time.
    • If the damage is minor and you can go without fixing it until you save up enough to pay for it.  You can also try buffing out minor paint scratches, using dent-pulling suction cups, or other methods for DIY repairs.


Single-Vehicle Accident: Serious Damage, Suspension Damage, and/or Mechanical Damage

  • Use Your Deductible If:
    • Your mechanic or repair shop reports a strong possibility of the price increasing due to unforeseen or “hidden” damage.
    • Your insurance will pay for a rental as part of the claim, and if your vehicle isn’t safe to drive.
  • DON’T Use Your Deductible If:
    • Your mechanic or repair shop is confident the fix will be simple and straightforward, and gives you a clear estimate on the cost of repairs. Make sure to ask them specifically about price increases.
    • If the repair estimate does not exceed $1,500 (mechanical or suspension repair estimates carry a higher risk of price increase than cosmetic damage).
    • You can go without a car for a week (or three) while your car is in the shop for repairs.
    • Your car is only worth about $3,000 and you plan on keeping it for longer than the next three or four years.  Most vehicles worth around $3,000 will depreciate to about $1,500 within three or four years without any damage.  With some collision damage, the same vehicle might sell for about $2,000 now and about $500 in a few years.  It might not be financially viable to fix a cheap car if you’re only going to be driving it into the ground.


Multiple-Vehicle Accident: Parking Mishaps and Low-Speed Fender-Benders

  • Use Your Deductible If:
    • You are at fault and the other driver is difficult, pushy, or vindictive.  You might be able to pay out of pocket for another person’s damages if they’re easy enough to work with; however, if the other driver starts demanding extra cash for their inconvenience, feigning neck injuries, or otherwise makes your life difficult, just let your insurance company deal with them.
    • The damage to one or both cars has affected headlights, taillights, turn signals, mechanical functions, or other elements of the vehicle necessary to drive safely and legally on the road.  With this type of damage, the cars will need to be fixed right away.  Unless you want to put down your credit card for the other driver’s rental car immediately, and potentially pay to tow their disabled vehicle to a repair shop, you might want to let your insurer handle such a claim.
  • DON’T Use Your Deductible If:
    • The damage is minor and the other driver has agreed to let you pay for their damages out of pocket, is easy to work with, and is not demanding a repair be completed immediately.  Be sure to ask them to get multiple repair estimates and choose the most reasonable one; stay in contact with the other driver’s chosen body shop and ask about costs and price increases; book a rental vehicle a week or two weeks in advance to get a low rental rate; require they drop their car off on a Monday for repairs; and be sure the shop orders parts in advance for the fastest possible turnaround time on the repair.
    • You’ve nudged someone’s bumper, but their bumper is already pockmarked and scraped, scratched, and dinged thoroughly.  If their car’s rear end looks like a parking mishap warzone, you haven’t changed the quality or condition of their vehicle by adding one small extra ding, so you don’t owe them an upgrade to a brand new bumper.  Attempt to negotiate with the driver and ask them to accept a settlement of a couple hundred dollars.  If they don’t take care of their car very well, they may just accept and forget all about it, which will be much cheaper than an insurance rate increase.


Multiple-Vehicle Accident: Serious Damage, Suspension Damage, and/or Mechanical Damage

  • Use Your Deductible If:
    • Nearly all serious multiple-vehicle accidents resulting from on-the-road crashes will cost more than $2,000 to fix; furthermore, overseeing and micro-managing all aspects of such a costly claim are beyond most people’s ability, not to mention the time commitment needed.
  • DON’T Use Your Deductible If:
    • It’s best to file a claim and have your insurer handle the other driver’s damage for serious accidents where you are at-fault, but that doesn’t mean you have to get your car fully repaired, or even fixed at all.  If the damage is cosmetic, or if you can simply fix the mechanical issues and leave the cosmetic damage, you can get a payout for the damage instead of fixing it.  Ask your body shop for a basic repair to save money instead of a perfect job.


*The exception to this “increasing rates” rule is when using your own coverage to pay for a no-fault accident, where the other driver has no insurance or if their insurer is being difficult or exceptionally slow.  In those cases, you’re free to file a claim with your insurer and let them pay the claim and seek reimbursement from the other driver.  Keep in mind, you might have to pay your deductible up front and wait for your insurer to reimburse you when they get repaid by the other insurer.


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