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Auto insurance claims can result in higher premiums and surcharges

To file an auto insurance claim, or not to file a claim? Sometimes it’s clear you should or you have to; other times, less so—especially if the auto accident or damage involves only you and your vehicle. Filing an auto insurance claim almost always results in higher premiums and even surcharges.

Read on for some advice that will help you determine if filing a claim would be in your best interest (if you have the option), or if not filing a claim would save you money in the long run by not having to deal with increased premiums or those surprising surcharges. 


Do document the damage

This is especially important for an auto accident involving you and another car or person. Take pictures of both cars, and the weather and road conditions. If anyone has been injured, first call 911. Then start taking pictures. Or perhaps the damage involves only you, such as that telephone pole next to your driveway mysteriously crashes into your car—take your smartphone out and start taking pictures. Even though the insurance adjuster will have their own camera, it never hurts to have your record of what happened. Additionally, your pictures will be the first ones from the scene.

Having clear documentation of any damage to your car that results in an insurance claim can help the insurance company determine what kind of a premium increase or surcharge is appropriate. Although such a decision is made at their discretion, an increase in premiums and an additional surcharge to your policy’s payments are rarely optional. If you are able to prove the cause of damage was outside of your control it might mean the insurance company won’t apply a surcharge. However, if they do apply one, it can last from 36 to 60 months just because you actually had to access the policy coverage. If you have questions about your company’s claim adjustment process, consult with your agent. 

Do know when to call your car insurance agent

Are people hurt? Are other people or cars involved? If the answer to either of these questions is ‘Yes’—call your insurance company claims office only after you call 911. 

And never, never, ever admit fault at an accident scene. When you purchase an auto policy, you are agreeing that the insurance company may settle claims as they see fit on your behalf. Admitting fault at an auto accident scene might invalidate your policy (depending on the company or how the policy is written—each company is different).

On the other hand, if you hit a metal pole in a parking lot and dented your car (doing no damage to the pole) and it will cost $1000 to fix the dent and you have a $500 collision deductible, you may want to have a chat with your independent agent (not the company) before filing a claim. 

Do raise your deductibles

If you haven’t heard it before, let me tell you now: your auto insurance policy is not a “repair” policy. It is primarily for major damages and injury to yourself and/or others involved. If you are getting surcharged for filing a claim, increase your comprehensive and collision deductibles to at least $500. If your car is older, you may want to increase your deductibles to $1000 for comprehensive and collision. This has the added benefit of lowering your premiums (in most cases), and may help you more easily afford any surcharges you get hit with after a claim.

Do brace yourself for a claim surcharge

Any claim, at any time, can result in getting surcharged by the insurance company—especially if you are at fault. A surcharge is how an insurance company recoups money paid out for losses (claims). It is applied to an individual policy as opposed to a rate increase which applies to all policyholders.

Insurance rates vary from carrier to carrier, as do their surcharge policies. Although surcharges are certainly a concern, as a consumer, you want make sure the company you do business with handles claims quickly and responsibly. Find out how the company is rated with AM BEST. This is an independent company that measures a company’s ability to pay claims. Most companies put their AM BEST rating on the first page of their website. If a company’s AM BEST Rating is high, it generally means it is financially stable and able to meet its claim obligations. 

Do shop around, but do it carefully

It’s a bit like going to college: if you go to 5 different colleges within a 4-year period for a 4-year degree, most people are less likely to take you seriously. There is nothing wrong with shopping around your policies, but only do so every 2-3 years. More and more companies are making it worth it to stay with not only a company, but also the agency. It’s called a longevity discount and it takes anywhere from 6 months to a year to earn. It’s not available with all companies.


Do not forget to mitigate the damage

If your bumper has been ripped clean off your car and is now wedged underneath your car—don’t drive your car until the bumper is removed. The same goes for a broken window or some other damage that might allow water to get into the car. Cover up the broken window with plastic and seal it well until you can get it replaced. Any further damage to the vehicle can result in the insurance company viewing the subsequent damage as negligence and make you pay extra on your premiums because of it.

Do not be concerned having high deductibles

The higher the deductible, the less likely you are to file a small claim. Also, your premiums will (typically) be lower. Since claims should be for major property damage (or loss), any damage that costs significantly more than the cost of your deductible could very well make a claim worth it to you. Since small claims are frowned upon, it’s oftentimes best for the insured to have a high deductible and pay a lower premium, than to have a low deductible and regularly pay higher premiums. Talk to your insurance agent about which deductibles they recommend.

Do not file small claims

Insurance companies are obligated to pay claims, but they are not obligated to keep you as an insured. When a policy renewal comes up, an underwriter looks at the frequency of claims over the past 3-5 years. The more claims within that time frame, the less attractive the policy. Your insurance policy is there for catastrophic losses not small repairs.

Do not claim already-existing problems

If something happens to your car, don’t try to claim all the other dents, scratches, dings, and mechanical issues that were already there. In addition to claim frequency, companies also look at the amounts paid out. Insurance is there to bring you back to where you were before the loss. It is not supposed to be a money-making proposition. Any dishonesty in a claim is considered insurance fraud and when it is discovered at any time thereafter, it can result in not only higher rates, un-insurability status, and astronomical fines, but even jail time if convicted.

Do not neglect getting an alarm system

This preventative measure is worth money to you in the form of discounts. A passive alarm/disabling system in your car can result in rate discounts. Each company varies by the amount of credit, so check with your agent to see what your company offers.

Jumping cartoon

Not every bit of damage to your car should result in a claim because it could easily cost you more in the long run with higher insurance premiums. Othertimes, it will save you money and get you back to where you were before the damage happened. Talk to your (independent) agent for advice on how to treat the problem you’re in before you call the company that insures you.

In the mean time, keep your deductibles as high as you can. Be prepared to document auto accidents to make sure you get the correct settlement, while hopefully avoiding major increases in your premiums and any additional surcharges. Check with your agent about available credits your company offers, and start saving money now in case you find yourself in a position where filing a claim is worth it—even if your premiums go up because of that auto insurance claim. 

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Charlie ScheinOwner & Principal Agent

Charlie has worked in the property/casualty insurance industry since 1988. He has owned his own independent agency since 2009. Star-Schein Agency offers insurance for Car, Home, Life, Health, Medicare Health, Business and Pet Health....

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