How to settle a car accident without an insurance company

Imagine you’re backing out of a parking spot at your local grocery store and accidently bump into a vehicle behind you. The accident leaves a small dent or scratch on the other person’s car, but your car looks fine. The question you face if you are involved in a minor accident is should you try to settle this incident privately by covering the damage to the other vehicle out of pocket, or should you report the incident to your insurance company?

In 2019, which is the latest year for data, there were 6.7 million car accidents that were reported to the police, according to NHTSA data. A whopping 4.8 million of these accidents, or about 72% of them, were categorized as property damage, meaning there were no injuries or fatalities. In other words, fender-benders.

Covering the cost of an accident out of pocket means keeping your insurance company in the dark, which should prevent a rate hike. However, it also means you may be on the hook if additional (more expensive) damage comes to light, or if an injury pops up a few days after the accident.

How you handle a small accident -- paying out of pocket or filing a claim -- will depend on a variety of factors including the amount of damage, your ability to cover the cost of the damage as well as your comfort with the risk of the victim coming back with an injury.

How to settle without insurance

If you are ever in a fender-bender and are considering not filing an insurance claim, here are some important things to do when settling a car accident without insurance.

1. Document the accident and all agreements made: Take pictures of both vehicles and the scene where the accident occurred. Make no verbal agreements. Draft a car accident settlement agreement form that all parties sign and get a copy of. Get everything in writing.
2. Record the details of the other vehicle and its driver: Document the other vehicle's license number, make, model and color. Write down the full name and contact information of the other driver and their insurance information.
3. Get a police report in accidents the other driver is at-fault: Even if your state doesn't require a police report, it is wise to get one. This report will be an official documentation of the vehicles and people involved, any injuries, damage and what reportedly happened to cause the wreck.
4. Get multiple quotes for vehicle repairs: Getting multiple quotes for garages/body shops for repairs to damaged vehicles will help to ensure you're getting the best deal.

What to do in a minor car accident with no damage

Instead of filing a claim, sometimes the drivers work out an agreement to settle the matter between themselves. The reason, of course, is to prevent a claim from wrecking the at-fault driver's car insurance rates for the next few years.

This route can be full of pitfalls but done right, it makes an expensive nuisance a less expensive nuisance.

When not to file an auto insurance claim

While there are plenty of reasons not to involve your insurer with a fender-bender, many drivers keep their mouths shut hoping to avoid a premium increase.

What will one claim do to your premium? Hard to tell. The rate jump will vary by insurer and state.

Drivers in Minnesota, California, Louisiana and Michigan get hit with the highest increases for one at-fault accident, while those in New York, Hawaii, South Carolina and Alaska see the lowest, compared to the rest of the country, based on a 2020 rate analysis by Insurance.com.

How much more you pay for coverage after an accident depends on your insurance company’s guidelines and your state laws. Many other factors also come into play, chief among them are the type of car you drive, your age, where you live and your credit history. Having said that, below you’ll see statistics from a 2020 report from Insurance.com on the national average increases for common accidents for a full coverage policy. That table is based on data provided by Quadrant Information Services.

How an accident affects car insurance rates

Granted, some insurance companies might not raise your rates at all -- but most will.

Multiple claims in a short period of time are a big red flag to insurers. "Multiple claims on your record will indicate to an insurer that you are not prudent or are simply inept behind the wheel. This can lead to a big rate increase or more likely, non-renewal," says insurance expert Kristofer Kirchen.

Even an inquiry can impact your rates.

TIPA claim inquiry or even just a call to your agent or insurance company regarding an accident may end up on your claim history -- even if you don't end up making a claim in the end, Kirchen says. If your claim record shows one accident but three inquiries related to an accident or claim in the last three years, insurance companies may consider you a risky driver -- which could result in a rate increase or cancellation, Kirchen says.

In almost all cases, the rate increase is going to stay in effect for at least three years.

How to get your car fixed after an accident without insurance

A fender-bender is a two-person affair, so you both need to be on the same page before you proceed. If the other person wants to get his or her insurer involved, it's highly likely that yours will be notified at some point in the process – and at that point, you’re probably best off just saying, “OK, let’s tell our insurers.”

Sure, you can suggest that you don’t, but if the other driver is determined to file a claim, that’s their right. But there’s nothing wrong with your not wanting to tell your insurer. You aren’t doing anything wrong by keeping your mouth shut.

Or more to the point -- reporting an accident to your insurer is not a legal requirement, says Brian Rauber with the Rauber Insurance Agency in Gladstone, Missouri. "Policyholders are not legally required to report all accidents to their insurer. It is common for drivers involved in minor accidents to work out a settlement between themselves," he says.

Any accident you choose to settle outside the insurance system should be a simple one.

That's assuming you have the money to fix somebody else’s car if it’s agreed that this was your fault. Making promises to pay that you later can't keep is a recipe for an insurance claim or a court date down the road.

Another thing to consider: If it was the other motorist’s fault, do you think they’ll actually pay for your fender bender? “Sadly, most Americans don’t have personal savings to cover an unexpected major expense,” says Justin Wolfe, owner of Wolfe Law Group in Atlanta. “If you make a handshake deal to resolve any vehicle damage or pay for doctor bills, you should know that the person who you are dealing with may be penniless. There is no way to know a person’s financial state of affairs at the scene of a car crash,” Wolfe says.

If you get the sense that the person you were involved in an accident with may struggle to pay for your minor damages, then you may want to just get this resolved and file a claim with your insurer.

The benefits and risks of settling an accident without car insurance

Here are some of the potential benefits and risks to consider when deciding whether or not to file a claim for a recent car accident:

Benefits:

• No increase in insurance premium
• No claim's process
• No restrictions on repair shops

Risks:

• If the other driver is at fault, you risk not getting your damages covered
• If you are at fault and the other driver later sues for damages like medical bills, repairs or pain and suffering

Avoiding the pitfalls

Once you've agreed to settle up privately, what should you do next? Document.

"Document, document, document," says Kirchen. "The proof is in the documentation. If something goes awry, you still have some means of recourse. Ultimately, in court, the person who has the proof will win if the other party only has hearsay."

Snap photos of both vehicles before you move them as well as close-ups of the damage on both cars.

You may want to forgo the photos if you are at fault. Thomas Simeone with Simeone & Miller in Washington, D.C., says, "Take photos of the vehicles and the accident scene if they will help you. If they will not, do not create evidence that can be used against you."

Now you also may want to call the police. A police report is the ultimate documentation if you end up in court. In most cases, the police will determine fault based on their research of the accident scene. At the very least the cops should provide you with a Driver Exchange of Information form.

But sometimes, if there was no serious damage, and if nobody was hurt, you’ll find that the police won’t come. It depends on the police department’s policy and probably how busy they are that day. That can also be a decent sign that you may want to handle the accident without involving insurers. So if you're of the mindset, "no accident no police report" or "minor fender bender no police report," your instincts are probably right.

After all, if the police don’t feel your car accident is worth coming out for, maybe it is something you should just work out with the other driver.

Now, if the police do end up coming, don’t worry that they might notify your insurer. "There is not much likelihood that your insurer would learn of the accident. Police reports are only distributed to insurance companies by request," says Rauber.

Again, Simeone looks at the other side of the equation. "If you were at fault, do not attempt to obtain a police report -- it will only provide documentation against you."

Your state may require an accident report for accidents above a certain threshold.

Kirchen suggests getting the at-fault driver to sign an agreement admitting liability and promising to pay.

No matter what, be sure to have the following information before you leave the scene:

• Name, address and phone number of the other driver
• Driver's license number - consider snapping a photo with your phone
• Name, phone number and policy number of the other driver's car insurer, just in case

Repairing your car

Coming to an agreement at the accident scene is only half the battle.

Expect some back and forth before you come to a final resolution. Setting a deadline is important; the longer it drags on, the more complicated a claim will become if you have to go to the other driver's insurer. If an agreement cannot be reached, or you lose confidence in the other person's ability to cover the damages, file a claim with the driver's insurance company immediately.

To begin, Kirchen recommends getting three estimates. "It is very possible the estimates will come back higher than either party expected. Unseen damage can often be expensive," he warns.

If the estimate is too high, it may be time to get the insurance companies involved. Again, it isn’t illegal or wrong to try and work things out on your own, and so nobody will hold it against you that you first explored how to get your car fixed after an accident without insurance companies involved.

The range of acceptable agreements is wide and will be unique to your particular situation and accident, but the innocent party can reasonably expect a rental car for extended repairs, use of original equipment manufacturer (OEM) parts, and the right to choose the repair shop.

Putting a car accident behind you

When the car is ready to get back on the road, there should be some final paperwork, especially if you are at fault. The at-fault party will want to ensure that the repairs end the incident.

Kirchen recommends getting the other party to sign a release of claims, more casually known as a paying out of pocket for car accident form.

"This ensures that the other party cannot come back to you saying they want to be paid for diminution of value or that they suddenly have injuries," he advises.

Simeone, once more, looks at the other side of the coin. "If you are the one injured and receiving money, try to avoid signing a release, so that you have the right to seek more money at a later date, if necessary."

Still, if you are injured, you probably should call your insurer instead of putting this experience in the “when not to file an auto insurance claim” bucket. There is a reason we pay for insurance, after all. It is there to alleviate our financial suffering in case of a wreck, and even fender benders can be pretty costly.

So, really, you don’t want to have a knee-jerk reaction either way. There are times you definitely want to look into how to get your car fixed after an accident without insurance. There are also certain occasions when your insurer should take the wheel and steer you through the headaches of getting a car repaired. Either way, do what seems to make sense, and don’t let fear guide you. Even when you leave your car after a fender bender, make sure you remain in the driver’s seat.

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