The True Financial Costs Of An Insurance Claim Following A Car Accident

 

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Auto insurance is an interesting concept in that it exists to protect you, but then it also has negative financial effects following a claim. If you’re involved in a car accident, your natural next step is to file a claim with your insurance provider to cover the costs of repairs, injury recovery, etc. In theory it should be a simple solution: you’re paying an insurance premium, so the insurer should just pay what’s due. 

The reality is far more complicated than this, and making an insurance claim after an accident will end up being more costly than you think. 

The True Costs Of Auto Insurance Claims

You can break down the additional costs of an auto accident claim into two parts: 

• Excess Payments

• Increased Insurance Premiums

When you agree to an insurance policy, you agree to pay a voluntary excess before any payments come through from your insurer. You set this, but the insurer also has a compulsory excess that you must pay regardless. It can immediately mean you’re spending close to a thousand dollars of your own money. 

But the more damaging part of an insurance claim is that it affects your insurance premiums for years to come. Even if you’re not at fault, next year’s insurance premium will be catastrophically higher than what you’re paying right now - and it can stay like this for up to five years following the incident. Not to mention that most insurance providers offer discounts for customers who’ve not made a claim - your discount gets wiped out right away. 

So, despite being involved in an accident that wasn’t your fault, you’re now paying hundreds or thousands more on insurance premiums for the foreseeable future. Factor in the excess payments, and it can end up costing more money than any repairs or medical bills! 

How To Reduce The Financial Costs Of A Car Accident

Genuinely, it might be cheaper to just pay for any repairs yourself after adding up these hidden costs. Or, an even better approach would be to hire a personal injury lawyer who will file a case against the at-fault driver. This way you bypass your insurance provider, don’t make any claims, yet still gain money to pay for any repairs, medical bills, and so on. 

Going down the legal route also means you get more money and can even claim for funds to help cover a lack of money because the accident stops you from working temporarily. After calculating the legal fees, it’s still more financially beneficial than going through your auto insurer. 

Does this mean you should never make an insurance claim after a car accident? It all depends on how much it will cost when you factor in excess payments and any changes to future insurance premiums. That being said, it is normally better to go down the legal route, especially if you need a lot of money to cover repairs - or even to buy a new car because yours is totaled. Insurance providers also drag out the claims process, meaning you deal with more stress and get less money. All in all, it’s more of a financial burden than you realize.