Should you report that fender-bender?

The effect on your insurance premium depends on numerous factors

Published: July 2013

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Pop quiz: You and your SUV are in a minor, low-speed accident. Luckily, no one is injured, but there's a little damage to your vehicle—more than just a scratch—and maybe to someone else's car or property. Should you inform your insurance company about it or keep the matter quiet and pay any repair costs out-of-pocket?

Fear of an insurance rate hike is often the concern behind that question. But there are some important factors to weigh as you determine your best course of action.

When to report it

Seven in 10 auto accidents in 2011 involved another vehicle, according to Department of Transportation data, as did 52 percent of car insurance claims filed in recent years by more than 31,000 Consumer Reports subscribers surveyed last summer. If your mishap falls in that category, always report it, especially if you may have been at fault, because your coverage also protects you against liability for harming others.

Your insurance company and some state laws might require you to report in such cases (ask your insurance agent about the policy and state requirements). But officially documenting the facts is also in your own best interests whenever you're involved with a stranger in a potential damage claim situation—even if you and another reasonable person work out a private arrangement to keep the insurance companies out of it.

"I've seen very few of these personal deals work out in my 2 7 years with Progressive," says Rick Sticca, claims general manager at the fourth-largest auto insurer. Repairs often cost more than reasonable people anticipate. For example, when a 2010 Toyota Corolla rear-ended a 2010 Toyota RAV4 at 10 mph in testing by the Insurance Institute for Highway Safety, the Corolla had more than $3,800 in front-end damage and the SUV incurred more than $6,000 in rear damage, because of the vehicles' bumper-height mismatch.

The Corolla's damage looked minor, and the RAV4's was almost imperceptible. Even the cheapest damage in 14 such trials involving seven vehicle pairings produced almost $3,000 in total losses—six times the typical $500 collision deductible.

Even the lack of immediate injury can be deceiving. The adrenaline rush accompanying even a low-impact crash can mask injury symptoms, and soft-tissue damage can take 24 to 48 hours to show up. Bogus injury claims are another possibility worth considering and can result from staged accidents and other fraud, according to the National Insurance Crime Bureau.

If you don't report and big costs surprise you later, your insurance company might not pay because its ability to investigate the claimed damage, when time was of the essence, has been lost.

When it’s a toss-up

Your toughest decision-making challenge comes when the damage is to your own vehicle and property. Filing a claim would probably produce a tempting payout of several hundred to more than $1,000, after the deductible. You must consider an unknown "x" factor of how your claim might impact your premiums. Unfortunately, it's impossible for consumers to know in advance how much their premiums will increase, and for how long, to weigh that against a claim payout. But among our subscribers, 7 percent of claimants felt that their insurer unfairly raised their premium as a result of their claim. (We didn't ask about fair premium increases.)

Most states regulate "chargeable" accidents, which are loss payouts that auto insurers are allowed to count against your driving record in calculating your risk and setting your premiums. The rules vary from state to state, but payout thresholds of $500 to $1,000 are typical, which means that accidents costing the insurer less than that can't raise your rate. Your insurer can tell you the rule in your state.

Major insurers also apply their own loyalty programs, which give "accident forgiveness awards," based on how long you've been with the company and your good driving and payment record. So an insurer might forgive a $1,500 accident if you're a relatively new customer, but a $5,000 accident would be overlooked if you've been with the company for five years. Forgiveness, of course, is generally a one-time benefit, so don't rely on it for a series of accidents. In some cases, forgiveness above the state threshold is a formal option that can cost extra.

When you shouldn't report

If the damage is minor and confined to your own vehicle and property, maybe from backing into your fence or garage door, you're typically not required to report it to your insurer if you're not making a claim. It also doesn't make economic sense to do so if the repair cost is smaller than or not sufficiently bigger than your collision coverage deductible.

Editor's Note:

This article appeared in the September 2013 issue of Consumer Reports magazine.

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