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In a Car Accident? Should You Pay Out of Pocket for Repairs?

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Our Chicago winter this year has been a lot less like a Midwest winter–the snow storms have been few and far between.  A few weeks ago we finally got hammered by a storm that dumped 10 inches over the city.  At the height of the snow storm I had to pick up my son from school.  As I waited at a stop sign, the driver behind me bumped into my bumper.

Luckily, the damage wasn’t bad.  When I took it to a repair shop for an estimate, they thought it would cost between $580 and $1,200 to fix depending on if there was any damage inside the bumper when they take it off to repair it.

Surprisingly, the woman who hit me decided she wanted to pay out of pocket rather than go through insurance.  When I told her that the repair would take 2 to 3 days and we’d need a rental car during that time, she agreed to cover that cost, too.

This is the second time I’ve been rear-ended in 5 years, and both times the repairs were less than $2,000.  Both times the drivers opted to pay out of pocket.

If you’re in a minor fender bender, should you pay out of pocket rather than going through insurance?

Reasons You May Want to Pay Out Of Pocket

Pay out of Pocket for Repairs1.  If you have a high deductible.  If you have a deductible of $1,000, for example, paying out of pocket if the repair is just a few hundred dollars over that amount may make sense.  You’ll save yourself from an increasing premium.

2.  If your insurance premium will increase substantially.  Each insurance company is different, but rest assured that if you cause an accident and file a claim, your insurance will increase.  Some insurers increase your premium by 10% and others by 20%.  You may be able to call your insurer and ask how much the premium will go up before you decide to pay a claim or not.

3.  If this is your second accident.  While you’ll pay an increased premium for one accident, if you file two claims within a few years of one another, the increase is substantial.  For instance, State Farm generally charges a 10% increase in premium for the first claim, but that amount increases to 45% for the second claim.  While it may hurt your budget to come up with a thousand or two to pay out of pocket for the repairs, that may be the better option if you’re facing a substantial increase that could last several years.

4.  If your insurance doesn’t have an accident forgiveness clause.  Some insurers offer an accident forgiveness clause, meaning, if you’ve been with the company for a certain number of years (usually 5 to 9) with no accidents, the insurance company won’t increase your premium on the first accident you file.  Again, though, you may want to save this benefit for a more substantial accident that you can’t afford to pay out of pocket rather than when the repair is relatively minor.

If you cause an accident, don’t automatically file a claim.  There are benefits to paying out of pocket.  You just need to understand your insurance policy as well as know exactly how much the repairs will cost before making a decision.

If you’ve caused an accident, did you pay out of pocket rather than filing a claim?

Original img credit: Oops, by fortes on Flickr

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How Much Car Insurance Coverage Do You Need?

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Car insurance, like most insurances, can seem complicated.  Deciding just how much car insurance coverage you need is the biggest hurdle.  Of course, it’s easy to select the coverage that meets the requirements of your state and the lien holder (of you owe on a loan for the car, you’ve got a lien holder, and it’s likely the bank you borrowed from), but those aren’t the only factors to take into account when deciding on how much coverage you need. Using a free online service can quickly find cheap auto insurance companies and shows multiple competitive policies.  In the end, you’ve got to find a coverage that will meet those requirements, and also fit within your budget.

State Requirements

You’ll want to know what the state requires you to have for insurance.  Any local insurance provider should be able to tell you, but you’ll want to double check if you’re planning on using an out of state or online provider.  If you still owe on your car, the lender on your loan will likely require that you have full coverage, so the state minimums will likely only come into play if you own the car you’ll be insuring.

Lien Holder Requirements

If you owe on your car, you’ve got a lien holder.  The lien holder is whomever you borrowed the money from.  Most (if not all) lenders will require that you carry full coverage insurance on the car.  It has nothing to do with them wanting to make sure you’re safe, and all to do with making sure that should you get in an accident, that they’ll get some of their money for the loan.  While most lien holders won’t require a certain level of insurance (over full coverage), it is a good idea to find out what they require just to make sure that you’re getting the coverage that you need.

Deciding on Coverage Levels

Car AccidentOnce you know the requirements of the state and any lien holders, you’ve got to decide on the level of car insurance coverage you want.  There are two ways to look at this.  The first is that you’ve got to find a coverage and provider that is affordable enough to fit into your budget.  The second is usually the forgotten way of looking at insurance.  The coverage doesn’t just have to fit into your budget, it also needs to cover you against a total loss.  If you have full coverage, but it’s only enough to cover a portion of what you owe on the car, you’ll also want to look at something that’s usually called “Gap Insurance”.  Gap insurance is aptly named in that it is designed to cover any gap between the value of the car and the remaining loan should the car be totaled before you pay it off.  Car insurance can be a combination of three coverages.  A liability coverage (usually what States require), Comp & Collision, and personal injury.  The exact levels that you need will vary based on your situation, but your insurance provider should be able to make recommendations for you.

How Much Deductible for Car Insurance

One of the easiest ways to lower the monthly cost of your car insurance coverage is to raise the deductible on your policy.  This method is a bit of a double-edged sword, however.  Raise it too high, and you might not be able to afford to have the car fixed.  Or, anything short of a major collision may fall under the amount of the deductible.  Again, your insurance provider should be able to help you compare the different deductible levels and help you find one that fits your budget without breaking you if you get in an accident.

The level of coverage that you need is going to be drastically different based on your own individual situation.  Do you own your car, or owe on your car?  Do you have sufficient savings to cover a higher deductible in an emergency?  What are the requirements of your state and any lien holders?  Make sure you know all that information before you go looking for car insurance, and remember to double check any suggestions by an insurance provider.  We’d all like to think that they are all honest, but not all of them are.  Knowing at least a little about what you’re talking about, and the information required to ask informed questions is a huge step towards not getting taken advantage of.

How much do you know about car insurance?  How much have you learned since the first time you bought insurance?

img credit:stupid.fotos on Flickr.

Car Accidents Abroad

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Over the years, it has become increasingly more common for people to rent cars or to drive abroad when they are going on holiday. With the increase in people driving vehicles abroad, there is also the inevitable increase in road traffic accidents.

If you are involved in a road traffic accident abroad that was not your fault and have suffered injury, you can still make a claim for compensation. Car accident claims involving drivers from other countries or in another country are on the rise and you should contact an experienced lawyer to help you with your claim.

What to do if you are involved in a road traffic accident abroad

If you are involved in such an accident, you should attempt to get as much information as possible from the other driver as you would do at home. In most countries, the Police will take a full report and you should ask for a copy, even if it is in another language. You should obtain the registration number of the vehicle involved and the details of the other driver and their insurance information.

Depending on the nature of your injuries, you should seek medical treatment as soon as possible either in the country you are visiting or as soon as you get home. If you are able, take photographs of the scene.

How to claim

Make sure you contact a personal injury lawyer who has experience dealing with car accident claims. Depending on where your accident occurred, they will be able to advise you on your claim and the next steps. For example, if your accident occurred in an EU state and the insurer has a registered office in your country, a claim may be made directly to that registered office. If you rented your car as part of a package vacation, you may alternatively be able to make a claim under the Package Tour Regulations which are designed to protect vacationers and would allow a claim to be made against your tour operator.

What if the driver at fault is uninsured or leaves the scene without stopping

If the driver responsible for your accident fails to stop or has no insurance then you still may be able to make a claim through your insurance provider, or the rental car agency.  In some cases, if you’ve paid with a credit card, the credit card company will provide you with insurance on rental cars.  It’s always a good idea to find out what kind of insurance there is available to you through those avenues before leaving for a trip.