How to Know when to Pay out of Pocket or when to File an Insurance Claim

Let’s face it. These days, not all insurance companies are outstanding. In fact, report too many claims or the wrong kind of claim, and you face the risk of having your premiums raised or your policy cancelled altogether. No one really wants that to happen to them, so when an accident occurs, people are usually at the crossroads whether to call their insurance company, or to just pay out of pocket. While there is really no clear cut formula on when to do one or the other, most people will agree that it would be better to pay out of pocket in the following situations.


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    Pay out of pocket if the damage is below $1,000. The basic truth about auto insurance is that it’s really meant to help you out in big, costly accidents that could really cripple you financially. Insurance premiums are sure to raise after an accident report. More often than not, the amount that is raised can start from $1,000 and go up from there. If you’ve been in a car accident and feel as though the damage is much less than that, it may be better to dig into your emergency fund than raise your premium.
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    Pay out of pocket if there are no injuries, or there isn’t even another party. If you happen to hit a fence, or a car with no one in it, then it may be better to pay for the damage out of your own pocket than bothering to call the insurance company, especially if you can afford to pay the tab now. If you let insurance take care of it, then you may again run the risk of raising that premium rate that you pay, especially if you may have had other minor accidents, or tickets in the last years that you’ve been driving. However, there is also risk involved if you choose to not tell your insurance company about it. If a police report is filed, or the other party makes an insurance claim, and your insurance company finds out, they can also use your failure to report the accident as a reason to raise your premium, or not pay your defense costs if ever you are sued.
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    In all other situations, use your common sense. Weigh carefully if you would save more money by paying out of your own pocket, or letting your insurance company take care of it. Always choose wisely, and examine all possible effects before making the decision.

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