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Insurance vs. Out-of-Pocket: Making the Best Decision for You

April 18, 2019

Insurance vs. Out-of-Pocket: Making the Best Decision for You

Have you been in an accident? Or maybe you’ve been the victim of vandalism and now you’re trying to figure out your options. Maybe you’ve already taken a look at your insurance policy or maybe you haven’t. Either way, you’re trying to make a decision on insurance vs. out-of-pocket costs. That’s how you’re going to figure out which is the best option and whether you’re actually going to spend more money in one direction or the other. Take a look at what we know to help you make that decision.

                                                                                        

Paying Out-of-Pocket

When you pay something out-of-pocket it means that you’re going to pay for it yourself. In these situations it means you’re keeping the insurance company out of it and you’re just going to deal with the costs and everything else that might be involved. There are some situations where this might actually be a good idea, so you may want to consider it if:

  • There is minimal damage

  • There is no personal damage

  • You don’t want to get the damage repaired

  • You have a high deductible

Let’s take a look at these. If there is minimal damage it means the repair is probably not going to cost you a lot of money. On the other hand, if you turn a claim in to your insurance company not only are you going to have to pay any deductible you might have first, you’re also likely going to see an increase in the cost of your insurance every month. That’s because the company then considers you a higher risk. If the repair is minimal you may want to just pay for it yourself and save yourself the added costs. You could just pay the one-time cost of getting the repair done yourself.

If you aren’t interested in repairing the damage at all you may want to consider not reporting it. The insurance company will generally not give you money or not give you much money for damage if you don’t take the vehicle to a reputable facility to have the damage repaired. If you’re not going to get it repaired there may be no reason to report anything (and risk your insurance company raising your monthly premium). You could get a little paint or whatever minor repair you want instead of taking it to a technician.

Those who have a high deductible may also decide it’s not worth reporting to the insurance company. After all, if you’re going to have to pay a large portion of the cost yourself anyway why would you bother? You’ll end up with the insurance company paying very little and then they’re going to raise your rates later on. That means you’re going to pay out a whole lot more than you might think to get those repairs. Take into account how much the repair is going to cost and how much the deductible is to make your decision.

Finally, the decision not to report to your insurance company and to just pay for things yourself is going to be a smart one only if there is no personal damage. If someone in your vehicle or another vehicle was injured in any way you will want to report it. That’s because you could find yourself facing a lawsuit or medical bills and if you don’t report to your insurance company that there was an accident they can refuse to pay those bills. You never want to risk a lawsuit in an accident, especially since they could be far more money than you would think.

 

Paying with Insurance

When it comes to an accident there are a number of different reasons that people have insurance. Sure, you might be required to have it because of the state you live in or you might be required to have certain types of coverage based on the state you live in. But in general, it’s going to be a good idea anyway. After all, you want to make sure that you are protected in case of an accident. You don’t want someone to be able to sue you and you don’t want your vehicle to be completely wrecked. But there are situations where you don’t need or want to report your claim to an insurance company. There are also times when you do.

  • There is a personal injury

  • The vehicle damage is extensive

  • You’re not able to afford to pay damages on your own

  • You have accident forgiveness

First, if there is an injury in the accident you should always report it to your insurance company. Letting them know that the accident occurred and that there were damages is going to be the first step in getting them to cover any kind of medical costs or lawsuits that might arise as a result of the accident. You definitely do not want to be stuck with those on your own. By reporting the rest of the damage your insurance company will take care of everything (over and above your deductible) and you can rest a little easier. Of course, that depends on the specific type of policy that you have and the coverage for things like medical.

If the damage to your vehicle is actually extensive and you’re going to need a lot of repairs or parts replaced you may want to take a look at the options for reporting. Repairing several different things is going to start getting expensive and not everyone is going to be able to afford all of those expenses. Plus, you’re going to start mitigating your savings if you have to pay extensive repairs. The insurance company may raise your rate because you report an accident, but that may not be as important to you if the damage is going to be large enough.

Along the same lines, if you can’t afford to pay for the repairs that your vehicle needs you may be forced to report it to an insurance company. You’re going to have to pay a deductible (in most cases, depending on your insurance company) but you’re going to have the company to cover the rest of the costs. Keep in mind that your rate is generally going to go up after an accident so the company can try to recoup their losses and account for the fact that you’re now a bigger risk (to them anyway). But that may be easier for you to afford overall.

Finally, if you have accident forgiveness and you’re not going to have the increase in rates that most people will because of an accident you may want to at least consider reporting it to your insurance company. If the accident you’re in is minor and the damage is minimal you may still want to consider paying out-of-pocket. After all, accident forgiveness could cover a much larger accident and you’ll want to hold onto that if you can easily afford to pay for the damages. If you’re in a major accident however, don’t worry about trying to come up with the money yourself if you have this type of forgiveness.

 

Knowing Your Policy

The most important thing is to make sure that you know your policy. You need to know what it says and how it works and you definitely need to know what you’re responsible for. By understanding the fine print you’ll be able to make a better decision about whether you want to report an accident or not. You’ll want to know things like your deductible, what’s covered and what isn’t and whether you have any type of accident forgiveness on your vehicle. Knowing all of these things will help you debate the actual cost of the report and the incident.

If you have a high deductible make sure that it’s something that you can afford in case of an accident. If you don’t have a deductible that means the company will pay for absolutely everyth

 

ing if something were to happen to your vehicle (with possibly some exceptions so you’ll want to look at the fine print). Knowing what’s covered is always important. Some insurance policies don’t actually include glass or they don’t include medical or a rental vehicle or any other number of things. You want to make sure you know everything about your policy and that you add on anything you might need.

 

Making a Choice

When it comes down to insurance vs. out-of-pocket, you’re the only one who can make the decision. Keep in mind that in most cases it’s going to be up to you to file a report, but if the other party files a report it will usually get sent to your insurance company as well. After all, their insurance company is going to come after yours to get the money and your insurance company is going to come after you. If you know the other person is going to report it, or if you know a police report is going to be filed is generally another reason to just make the report yourself.

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