File a Car Insurance Claim or Accept Direct Payment?

A client called me last week with a question about how to handle something. Her teen had been in a little accident with an adult, and it was the adult’s fault. The good news is the teen was unhurt and the damage to her car was minimal; the bumpers simply rubbed together. According to the body shop the client visited, they could either remove, sand, and repaint the bumper or replace it. The difference in cost was minimal.

Based on how little damage was done, the other party offered to pay for the repairs out of pocket instead of having a claim filed. My client’s question was whether or not she should accept the payment of file against the other person’s insurance? It is an interesting question which can be answered yes or no as there are benefits and risk in doing so.

Benefits: The benefit for agreeing to a direct payment for repairs for the person that was hit or not at fault in the accident is that the accident is kept off their insurance record or CLUE report. Even a not at fault accident may cause a person’s premium to increase at the next renewal. It doesn’t seem fair, but any kind of claim can impact one’s car insurance rate.

In the same way, agreeing to a direct payment from the person that hit you keeps the accident off their insurance “record” and counting against them when their policy renews. An at fault claim carries more weight than a not at fault claim and the impact of the higher premium can last 3 to 5 years. In a very minor incident costing only a few hundred dollars, paying for the repairs out of pocket provides a real saving and is to both parties advantage.

Risks: There are risks in agreeing to a direct payment from an individual including:

  • Disagreement over the amount of the repairs.
  • How the payment will be made (direct to you or the body shop).
  • How to handle it if additional damage is uncovered when a bumper is removed.
  • Will they cover a rental car for the days your vehicle is in the shop?

For the person who wants to pay the claim out of pocket, there are risks too including:

  • What if the person you hit comes back with a bill more than the amount you paid?
  • Gaining acceptance the claim has been paid in full and releasing you of legal liability if the repair shop does a poor repair job.
  • Will the repair shop warranty their work?

Navigating most of these issues begins with clear, open, and direct communication between both parties. If you consider going down this path, I recommend the person who was hit take the car to a certified repair shop and obtain a thorough evaluation of the damage with a detailed repair estimate. Next, address how to handle the issue if any new damage turns up in the process of the repairs that was not visible in the initial evaluation. If the person is unwilling to pay more for any surprises, a rental car, or begins to develop an attitude, then file a claim with their insurance company and avoid the headache. This is, after all, why we have car insurance in the first place.

If you’re the person wanting to pay for the repairs, stipulate the repairs be made at a certified body shop with a good reputation. Review the repair estimate and determine the maximum you’re willing to pay for repairs. Make all payments with a cashier check so there is a record of it. When the repairs are complete or payment is made, have them sign a receipt for the payment and a release for the work performed.

If there is even a hint of bodily injury from the person or persons in the car that was hit, do not under any circumstances agree to a direct payment from an individual. In these instances, it’s best to deal directly with the insurance company regardless of the amount of damage to the vehicle.

These were the points I covered with my client which enabled her to craft an agreement that was acceptable to her and the person who hit her teen. What would you do? Share your comments, questions, or experiences with me in the comments section of our blog or on our Google + or Facebook pages. I’d love to hear from you!

Evie Wise
Evie Wise


Evie Wise
Evie Wise

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