Most drivers are required to have car insurance in order to legally drive the vehicles they own or lease. The types and amounts of coverage we purchase, and the deductibles we choose, help determine the rates we pay.
After a car accident, we cringe at the thought that our insurance premium will increase if we report the accident to our insurance company. Thinking logically, we often conclude that it makes sense not to report the accident if we can repair the damage for less than the cost of the deductible, plus the increased premium that will result. While this thought process might lead you to decide not to report the accident, there are other factors that should be considered.
You Could Be in Violation of Your Insurance Contract
First, your insurance policy probably contains a provision that requires you to promptly report all accidents to the insurance company. So, your failure to report an accident could jeopardize your right to coverage. How could this happen?
Let's say you and the other driver agree to work out a settlement that sidesteps both of your insurers. But the other driver has a change of heart and decides to sue you for her injuries or property damage. In that situation, your insurance company might refuse to defend the suit on your behalf, on the basis that you failed to meet your contractual obligation to promptly report the accident to them. If that happens, you'll be personally exposed to liability for money damages. Learn more: What If I'm Sued for a Car Accident and I Don't Have Insurance?
Do the Math -- Not Reporting the Accident Might Not Be Worth It
You may have chosen to keep your premium down by opting for higher deductibles, but the cost to you of avoiding the payment of a high deductible (say $1,500 for collision) may well be far greater than the increased premium that will result from making a claim.
As an example, many "minor" accidents result in repair costs in excess of $2,000; if you don't report the accident to your insurance company, you will have to pay the full cost of the repair yourself (say $2,500) and your premium won't go up. However, if you report the accident and only have to pay the $1,500 deductible, your premium might only go up by a few hundred dollars and you will be ahead of the game. In addition, many car insurance companies won't increase your premium after your first accident if you otherwise have a clean record. So, it's usually a good idea to explore these scenarios with your insurance agent when obtaining or renewing your policy, in order to minimize your accident-related costs and exposure. (More: How Does Insurance Affect a Car Accident Case?)
Is a Lawsuit Possible?
Another way of posing this question is, "Were you the only one involved in the accident?" The perils of not reporting an accident to your insurance company are far greater when another vehicle or someone else's property is involved. (Think of the scenario where the other driver changes her mind about not getting the insurance companies involved.)
When you are the only driver and the only damage from the accident is to your own property -- maybe you backed into a tree -- you need not be concerned about someone else suing you for injuries or property damage. If you are uninjured, and the damage to your vehicle or property is minimal (maybe a scratched bumper or a small ding in your garage door) you are probably safe if you do not report the accident to your insurance company. In these cases, you will likely be able to repair the damage for much less than the cost of your deductible, or you might just decide to forego the repairs altogether.
But in any situation, the decision not to report an accident to your insurance company should not be made hastily, as it can have serious consequences under your insurance policy as well as your pocketbook. Learn more: Will My Car Insurance Go Up Even If I Didn't Cause the Accident?