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You are driving down a street near you and find yourself putting another car in the back at a red light. The impact crushes the other car’s bumper, but your car barely has a scratch.
So, should you settle this car accident in private, paying the damage out of your pocket, to avoid warning your auto insurer or the other driver’s insurer and possibly triggering a rate increase? Well, like so many auto insurance issues, it depends on several factors.
Is it wise?
Generally speaking, settling a car accident in private – without the intervention of an insurance company or a lawyer – “would not be a very wise thing to do”, says Patrick Salvi, lawyer specializing in personal injury, managing partner and president of Waukegan, Ill.. Salvi, Schostok & Pritchard firm.
The only time it can make sense, says Salvi, is if you are sure there is only minor damage and there is no chance that an injury claim will arise on the road.
And how much can you afford to pay privately? Car damage and injuries can quickly add up. “The location of the line varies among individuals. People with a lot of money can afford to make private claims at higher amounts than people with little money, ”says Bob Hunter, director of insurance at the nonprofit Consumer Federation of America.
It’s common for a driver at fault to be the one initiating a private settlement in order to potentially avoid problems with their insurance company or because they don’t have auto insurance. But because the true extent of the damage or injury may not be clear for some time, insurance experts warn against accepting cash to immediately settle an accident without involving drivers’ insurance companies. .
On top of that, a private cash settlement may not adequately compensate someone for damage or injury.
Why you shouldn’t settle a car accident in private
Several reasons emerge for not settling a car accident in private. Here are three.
Potential damage to the vehicle not detected
When it looks like an accident was just a fender bender, serious damage may not be discovered until an auto repair specialist has examined the car.
If you’ve already dealt with the accident with the other driver but haven’t notified your insurance company, you may have to pay thousands, rather than hundreds, of dollars to repair the damage to your vehicle. Why? Because your insurer was not notified of the accident, Salvi says, and can deny a claim you file after reaching a private settlement.
“It’s not a situation you want to be in,” he says.
Possible medical problems that arise later
After the accident, drivers and passengers may appear to be in good physical condition. But what if the other driver starts to have neck and back pain a few weeks later, after you think everything has been sorted out in the private regulation? If neck and back pain requires treatment, the injured person may legitimately want you to pay the medical bills.
“Typically, if someone has a neck or back injury, it will take a few weeks to find out whether the issue is completely resolved or not,” says Jack Zinda, personal injury lawyer, founder of Zinda Law Group , based in Austin, Texas. .
Again, if you didn’t notify your insurance company of the accident, you could be forced to pay the other driver’s bills (and possibly be sued) because your insurer refuses to cover the associated claims. to the accident.
Obligation to report the accident
Auto insurers generally require that you report an accident as soon as possible. If you fail to do so, a future claim arising from the accident may be denied.
The only time you can feel comfortable not reporting an accident is if the incident happened on your property, only your vehicle was involved, no one was injured, the only one property that was damaged is yours and the repair bill is relatively low. For example, let’s say you came out of your driveway and hit your fence. In this situation, it may be acceptable not to notify your insurer of the incident.
“Unless you are sure it won’t come back to haunt you – even if it’s a pain in your neck and even if it could be a strike against you with the insurance company – the safest thing is always to give them advance notice, even if you are sure there is very little damage or liability, ”says Salvi.
Keep in mind that when you report an accident, it doesn’t mean that your auto insurance rates will automatically increase upon renewal. You face a possible rate hike after filing an accident claim, but not after simply reporting an accident to your insurer.