In a typical year, nearly 6 million car accidents are reported to the police. Most of them, 70 percent, are categorized as property damage, meaning there were no injuries or fatalities.
In other words, fender-benders.
These minor accidents occur in parking lots, residential streets and even driveways, and while they are reported to police, they are not always reported to the insurance companies of the drivers involved.
Instead, 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.
Why wouldn't I file a claim?
While there are plenty of reasons not to involve your insurer with a fender-bender, the majority of us keep our mouths shut hoping to avoid a premium increase.
What will one claim do to your premium? The rate jump will vary by insurer and state; some might not raise your rates at all - but most will.
Using Insurance.com's auto-insurance quote-comparison tool, we looked at rates for a 30-year-old Dallas driver with a clean record piloting a 2014 Chevrolet Cruze; then we added an accident that included a liability claim and a collision claim totaling $1,400, and then a second, similar accident on top of that one.
Rates after accident claims can soar quickly
$2,774 (42% increase)
$4,982 (156% increase)
$2,524 (23% increase)
$2,808 (37% increase)
$2,856 (33% increase)
$3,890 (81% increase)
$4,028 (72% increase)
$5,086 (118% increase)
$4,838 (97% increase)
$9,354 (282% increase)
According to data from six major carriers gathered for Insurance.com by Quadrant Information Services, the average rate increase after a single claim under $1,000 was 18 percent.
Multiple claims in a short period of time are a big red flag to insurers. According to Kristofer Kirchen, with First Florida Insurance Network of Central Florida, "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."
Even an inquiry can impact your rates.
"An inquiry could end up on your claim history even if you don't make a claim," says Penny Gusner, consumer analyst with Insure.com. "A record that shows one accident but three inquiries in the last three years indicates a risky pattern and could result in a rate increase or cancellation."
In almost all cases, the rate increase is going to stay in effect at least three years.
Let's not tell our insurers
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.
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," says Rauber.
Any accident you choose to settle outside the insurance system should be a simple one, says Insurance.com managing editor Michelle Megna. "The second that fault is in question or someone feels a twinge in their neck, I would advise handing the other driver your information and let your insurance company do its job," she says. "But a broken tail light? Perhaps pull out your checkbook for that minor damage."
That's assuming you have the money. Making promises to pay that you later can't keep is a recipe for an insurance claim or a court date down the road.
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 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.
Don't worry about the police notifying 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.
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 it 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. "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 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."