When is the Right Time to Use Car Insurance Coverage

Understanding when and how to use coverage can be confusing; but with help from an expert insurance agent and a few key principles to get you started, anyone can learn how to make the most of their insurance.

To file or not to file?

Oftentimes, the decision to file an insurance claim is fairly straightforward. When you are involved in an accident with another driver, for example, or your house is damaged in a fire, it would make sense to utilize your auto or fire insurance to help pay for repairs. However, as noted in a recent piece for Fox Business News, there are other circumstances in which it may be wiser to pay out of pocket.

For instance, take the scenario in which you or one of your family members inflicts minor damage on your vehicle due to a bump or poorly timed reverse in the garage. The repair costs may be more than you would like to pay; but a good rule of thumb with car insurance is to save it for major damage and accidents rather than using your collision coverage to avoid paying for minor bumps and scrapes. Why? For starters, insurance costs go up when the insurers pay out. In addition, your own insurance premium will likely cost more down the line if you use coverage for every little repair possible. Also, keep in mind that damage like that described in the aforementioned scenario counts as an at-fault accident, which in some cases will yield a surcharge or rate hike from your insurance company. Even if this isn’t the case with your provider, almost all companies boost rates in the face of multiple claims: and since you can never know when you might be hit with another accident, it is best to a play it safe.

Good driver discounts are another factor to consider when deciding whether or not to use auto insurance. At-fault accidents can eliminate such discounts, which can fall at approximately 25% — leaving you with an even higher premium to pay moving forward. Finally, there is always a chance that your company will refuse to renew your coverage at the end of your term on the basis of an at-fault accident. Therefore, while it might initially seem safe to use coverage to save cash on car repairs, the risks far outweigh the benefits in most cases.