When to Make an Automobile Insurance Claim

If you’ve been involved in a car accident, one of the first things you should consider is how your automobile insurance comes into play. Should you file a claim under your policy, and if so, when should that claim be filed? You may be hesitant to make a claim because you think your rates will go up. But if you don’t file a claim -- or at least report the accident -- you could be in for a rude awakening. Read on to learn more.

Reporting the Accident vs. Filing a Claim

If you've been in an accident, it's critical that you know what your insurance policy requires you to do. For one thing, it could make it easier for you to decide on a strategy.

First, there’s a difference between reporting the accident to your car insurance company, and making a claim under your coverage.

Every car insurance policy requires an insured to notify the insurance company of any "occurrence" or "event," like an accident, that might lead to a claim being made. In other words, if there's any possibility that you or someone else could ask for payment from the insurance company over an incident, you have to notify the insurance company of that incident. Most policies contain language that says the accident must be reported “within a reasonable time,” which could mean within a day or two.

As opposed to reporting the accident, filing a claim means asking the insurance company to provide coverage to you based on the accident and the terms of your policy. Depending on your coverage, that could mean paying for your car repairs, and/or paying your medical bills. It could also mean that the other driver files a third-party claim with your insurer, asking the company to cover his or her own losses stemming from the accident.

When we talk about making a claim versus reporting the accident to the insurer, the two can admittedly start to blend together. That’s because once you report the incident, the insurance company will probably assign an adjuster to investigate what happened, whether or not you end up making an actual claim. That means the insurer will try to obtain the police report, will contact the other driver’s insurance company, and will try to get witness statements regarding the accident.

If You Don’t Report the Accident to Your Insurance Company

The worst case scenario here is probably is that the insurance company tries to cancel your policy because you didn't do what the contract required.

At the very least, if you don’t report the accident to the insurer, and later you try to make a claim based on the same accident (let’s say you try to do that more than a month after the accident occurred) you can count on the insurer trying to deny coverage.

Remember, an insurance policy is a contract, and if you don't do what the contract requires you to do, then you've violated or "breached" the contract, which could allow the insurance company to cancel your policy or deny coverage.

For example, let's say you were in an accident with another driver. Both cars appear to have very little damage, maybe a small dent in a bumper or a little scratched paint. Neither you nor the other driver feels any pain. So, you agree not to bring your insurance companies into the matter.

What if, a few weeks later, the other driver calls you and says that he has thousands of dollars in vehicle damage, plus he's having serious neck pain and stiffness all of a sudden? Or, what if your car incurred a lot more damage than you initially thought, or you start having significant pain yourself? Since you didn't notify the insurance company of the accident, they could refuse to pay the other driver's damages (and yours, too), meaning you’re personally on the financial hook.

What if the other driver files a claim with his or her own insurance company? The other company would almost certainly pay the other driver’s claim, and then, if they think you were at fault for the accident, come after you to recover what was paid to the other driver. If you reported the incident to your insurance company right away -- or filed your own claim under your own policy -- your insurer would handle repaying the other insurance company, or disputing your fault for the accident. But if you didn't report the accident or file a claim right away, again, you could have to repay the other insurer out of your own pocket.

Will Your Rates Increase If You Make a Claim or Just Report the Accident?

As you probably suspect, if you or the other driver makes a claim against your policy, and it turns out you were at fault for the accident, there’s a very good chance you could see an increase in your premium (that’s the monthly or annual rate you pay for coverage). The same goes if your insurer has to repay the other driver's insurance company, because of damages you caused in an accident.

But a premium (rate) increase isn’t automatic, and you shouldn’t see any bump at all in your premium if the other driver is clearly at fault for the accident, and you make a claim for your losses under your policy.

The bottom line is that you’re contractually obligated to report any accident to your insurance company if the crash does (or could) fall under the umbrella of what the policy covers. And apart from your contractual obligations, failing to report the accident to your car insurance company could have serious financial consequences for you later on.

Updated: June 22, 2015

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