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Save money by paying for the small stuff


A

Question: Do you think I should have my insurance company pay for a broken rear light? I don't know how it happened or who caused it. 

Answer: No. You shouldn’t bother using your car insurance for such minor damage to your car.  Pay out of pocket for the broken light to escape a future rate increase.

I’m the first to say that if it’s financially feasible you should carry comprehensive and collision coverages as part of your auto insurance policy. These physical damage coverages give you protection if your insured vehicle is damaged. However, having such coverages doesn’t mean that you should file a claim against them just because you can.

My recommendation is that car insurance should be for the major things, not the minor ones. (See “Save your insurance for the big things.”)

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If you use your auto insurance policy for every little scrape and scratch you find on your vehicle, your premium will start to inflate to cover the numerous claims you’ve made, or worse yet, you could get canceled or nonrenewed for too many claims. 

You may think that this is just one little claim. The problem is you don’t know when the next accident will occur.  Multiple claims in a period as long as three years isn’t looked on kindly by car insurance companies.  (See “Here’s how many car accidents you’ll have.”)

Too minor to claim

Remember that at the inception of your policy you agreed to pay a certain amount (your deductible) before your collision or comprehensive benefits are tapped.  If all that is broken is your tail light, then it’s doubtful that the cost of repair would even exceed your deductible amount; this means you wouldn’t even be able to make a claim. 

For instance, if your deductible is $250 and the cost to fix the rear light turns out to be only $100, then even if you call your auto insurer, it won’t be able to help you since you haven’t reached your deductible.

What your insurer may do though is note that you called in and had some damage to your car that wasn’t covered by a claim. This inquiry can then show up on a claims history database (your C.L.U.E. report), even though no action was taken by your insurer to pay a claim.

While this technically shouldn’t hurt your car insurance rates, since there is no accident on your record or claim paid out, I find it’s best to keep any little thing like this off your record.

You don’t want auto insurers getting the idea that you’re in a lot of small accidents or incidents that don’t turn into claims.  It could still raise a red flag that you are more of a risk as a driver – and to auto insurance companies more risk equals higher rates.

If your car is damaged in a way that you know the cost is going to be much more than your deductible amount (and much more than you can personally afford to pay out), then go ahead use your coverages to file a claim. If your rates go up due to claims, then go out and comparison shop to find the best rates possible for your situation.

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