Clark Howard’s #1 Rule Before You File an Auto Insurance Claim

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Not sure whether you should file an auto insurance claim? Money expert Clark Howard has a few things to consider before you decide. In this article, you’ll find:

Clark Howard’s Rule For Filing Auto Claims

When it comes to filing an auto claim, Clark’s advice is simple.

“Generally, you start from the standpoint: You never make a claim. And then have to come up with good reasons to make it.”

There are many downsides to filing a claim with your insurer. Here’s a big one: There’s a good chance the cost of your auto insurance will increase. By how much depends on the type of claim you file and how costly it is. But, unless you absolutely need to file a claim, you should avoid doing so. The first step to avoid filing an unnecessary claim? Raise your deductibles.

“You want to avoid the temptation from making a claim in the first place and reduce your premiums in the second place — or whichever order you like — by raising the deductibles on your insurance.”

As Clark explains, increasing your deductible is a double win. Not only will you be less tempted to file unnecessary claims, but you’ll also see your premiums go down. Depending on your insurance company and whether you have an auto loan, you might only be able to raise your deductible to $1,000 or $2,500. Clark recommends at least $1,500 if you can afford it.

Of course, you should never raise your deductible higher than you can afford. But — even if there’s a ceiling on how high you can raise your deductible — that also doesn’t mean you should automatically file a claim if something happens and the cost of damages exceed it.

“You don’t want to make claims on auto insurance for anything that you can afford to pay yourself. The reason is that you spoil yourself from being able to shop with other insurers,” says Clark.

Clark’s Exception To His Rule

With any rule, there is usually at least one exception. And Clark has an exception to his rule about avoiding claims you can afford out-of-pocket. What’s the exception?

“I’m [only] talking about something where it’s just your vehicle that’s damaged,” says Clark. “It could be like: My daughter ran into a pole in an underground parking garage. And so, I paid for that myself because I didn’t want that on the record.”

“If [the accident] involves another driver and you’re at fault, then obviously it’s very dangerous territory not to contact your insurer.”

“If they’re later watching bad TV, and they decide they’re going to hire one of those lawyers they see in the ads, you’re dead meat if you never told your insurer,” Clark warns. “But when it’s something you’re trying to decide whether you want to claim it or pay it: as much as you can afford to pay that you don’t have a claim on your record is better. ‘Cause you’re not going to get surcharged on your insurance. And it’s not going to spoil your ability to shop for insurance elsewhere.”


When To Consider Filing an Auto Claim

Here at Team Clark — when it comes to filing claims — the consensus is that insurance is meant for catastrophic situations only. Of course, it can be tempting to file an auto claim as soon as your car is somehow damaged. After all, you pay regularly on your premiums and should be able to use what you’re paying for, right? The problem is that once you file a claim, you risk:

  • Insurance premiums increasing
  • Being dropped by your insurer
  • Losing the ability to shop around for better rates
  • Claims going onto your C.L.U.E. report for years

And that’s just the beginning. So, with Clark’s rule in mind, there are two main types of situations when you should consider filing a claim.

1. You’re at-fault for an accident involving another driver/vehicle.

Anytime another party is involved in an accident with you, you should contact your insurance immediately. Even when damages seem minimal, it’s best to give your insurer a heads up.

“As an example: A woman backed up at a very high rate of speed, and ran into one of our parked cars,” Clark says. “She was an honest person; she didn’t leave the scene. And she said ‘I’m going to pay for it out of my pocket, I don’t want to involve the insurance company.’ Well, what happened was the cost of repairing the vehicle was $5,200. So, she said ‘On second thought, I’m going to file a claim.’”

You might be in a situation where you can afford to pay out-of-pocket for damages you caused. In that case, you can work with the other party and your insurance to resolve your liability. But, you might be left dealing with someone who wants to take you to court. If this happens, you’ll be hit with all kinds of fees and unexpected expenses. Even worse? If you wait too long to report the accident, your insurer might be able to get out of paying.

So — even if you can pay for all damages on your own — the safe thing to do is tell your insurer when you’re in an accident involving other people.

2. You can’t otherwise afford to pay for damages.

“For most people, the question of when to involve insurance is a practical matter of your resources,” Clark says. “When you file [a claim] often is when you can’t absorb the loss out-of-pocket on your own.”

You might find yourself in a situation where you simply can’t afford to repair or replace your vehicle on your own. And trying to save money for repair after an accident can take a lot of time and potentially cost you more money from the loss of access to your vehicle.

When you absolutely can’t afford to fix things on your own, filing a claim might be your only option.

When Not To Consider Filing an Auto Claim

Getting hit by debris might leave a ding on your car that you don’t like looking at, but it’s not worth filing a claim over. In general, you should avoid filing small claims with your auto insurer. A few examples of small claims include:

  • Broken mirrors
  • Cracked windshield
  • Minor surface damages

Additionally, did you know that calling your insurer’s roadside assistance can be treated like a claim? That’s one reason Clark says you should never get roadside assistance from your insurance provider. Insurers sometimes treat use of their roadside assistance as they would an at-fault claim. It might go on your C.L.U.E. report and be used against you by insurers in the future.

“If you have too many claims on your C.L.U.E. report, that could make you radioactive to other insurers for years…leaving you stuck with your current insurer, without the ability to comparison shop,” Clark says.

It might go without saying, but you shouldn’t file a claim when damages are less than your deductible. An example is: if your car repair costs $900 but you have a $1,000 deductible. Even though insurance won’t pay you a dime, they’ll report the claim. Then, you might be stuck with another claim on your C.L.U.E. report despite your insurance paying nothing for it.

Instead, try not to consider filing a claim unless it’s at least $500 above your deductible. This is Clark’s $500 rule: Whatever your deductible, you should always try to pick up the tab for $500 above that before getting insurance involved.

So, let’s say your deductible is $500. If you can afford it, don’t file a claim unless the cost of repairs goes above $1,000.

Final Thoughts

It might be tempting to file a claim as soon as your car is damaged. But filing a claim can lead to financial damages down the line when it comes to the cost of your auto coverage. So, before you file a claim, ask yourself this: How much can I afford to pay out-of-pocket?

For Clark, knowing when to file a claim is simple.

“It’s based on what your pain threshold is. But for a car claim, your threshold should never be below $1,500, unless you just can’t come up with the money.”