When Should You Pay For Vehicle Repairs Out-Of-Pocket?

Last Updated on November 10, 2021

There is much debate as to whether it makes more financial sense to file an auto insurance claim after an accident or pay for repairs out-of-pocket.  The truth is both arguments in this debate are somewhat meritorious. The decision to pay for repairs out-of-pocket or rely on the auto insurer to cover related expenses ultimately depends on the unique circumstances of the accident, the driver in question, and a number of other factors.

At-fault Accidents: File a Claim or Pay Out-of-pocket?

pay for fender bender out of pocketIf you are at fault for the accident, you have an important decision to make: file a claim with your auto insurer and risk the rate of a monthly rate hike or pay for the repairs out-of-pocket.  If you have a significant at-fault claim or if you file several at-fault claims, there is the potential for your insurer to raise your rate to an exorbitant level. It is also possible the insurer will simply decide you are not worth the risk of insuring following several at-fault accidents.  Auto insurance companies are perfectly within their rights to refuse to do business with you.

In some cases, filing one or several at-fault claims will result in the addition of a surcharge to your policy. However, if you pay for the repairs of your vehicle as well as the victim’s vehicle out-of-pocket, you might end up thousands or even tens of thousands of dollars in the hole.  Do the math, determine if you can afford a moderate auto insurance rate hike or if it is better to pay out-of-pocket to eat the cost now and save money with unchanged auto insurance premiums in the years to come.

When It Makes Sense to Pay Out-of-pocket

It makes financial sense to pay for car repairs out-of-pocket if the accident was minor.  The costs for such auto repairs tend to be fairly low. There is no sense in risking an auto insurance hike that you have to pay 12 times each year when you can take care of minor repairs by writing a check for a couple of hundred dollars within days or even hours of the accident.  Furthermore, if you are at fault for the accident, you should know it will remain on your record for upward of three years.

It won’t hurt to pick up the phone, contact your auto insurance agent and ask if filing a claim will impact your auto insurance rate.  Though the insurance company representative might not be able to provide you with an exact dollar figure that your monthly rate would increase after filing a claim, he or she can provide a general idea as to how much more you would have to pay.  In fact, some auto insurance agents will go as far as reviewing your driving history while on the phone with you to determine if your claim is worth filing. So don’t be so quick to file an auto insurance claim after a minor fender bender or scraping your vehicle against the side of your garage; paying out-of-pocket is sometimes the most financially prudent means of resolving these comparably insignificant damages.

What About Drivers With a History of At-fault Accidents?

It also makes sense to consider paying for repairs out-of-pocket if you have a prior at-fault accident on your record.  If you have multiple at-fault accidents tied to your name, your auto insurer might not renew your policy.  If you are denied regular auto insurance, you will be put in an assigned risk or high-risk insurance pool until your oldest claim hits the three-year mark.  Those who drive at a high frequency, are not confident in their driving ability, or already have an at-fault claim on their record might find it makes financial sense to pay out-of-pocket when at fault for a new accident.  Even if your repairs will cost several hundred dollars, eating this cost now might ultimately prove cheaper than paying for high-risk insurance for one or several years.  High-risk insurance tends to be egregiously expensive as those who resort to it have been classified as comparably risky drivers.

When in Doubt, Do the Math

Let’s take a look at an example of a common situation that drivers face: Mr. Smith pulls out of his garage in a hurry to get to work.  He scrapes the side of his vehicle against the garage as he backs out. Mr. Smith obtains an estimate of $450 for scratch removal. His auto insurance deductible is $400.  There is no reason to bother with the auto insurance claims process to save a mere $50. After all, the insurance company could deem Mr. Smith to be that much more of a risk behind the wheel after he files his claim and hike his auto insurance rate. Crunch the numbers, weigh the pros and cons, and take your time when deciding whether it is better to pay out-of-pocket or file a claim.

James Shaffer
James Shaffer James Shaffer is a writer for InsurancePanda.com and a well-seasoned auto insurance industry veteran. He has a deep knowledge of insurance rules and regulations and is passionate about helping drivers save money on auto insurance. He is responsible for researching and writing about anything auto insurance-related. He holds a bachelor's degree from Bentley University and his work has been quoted by NBC News, CNN, and The Washington Post.
Back to Top