Car insurance is a fairly straightforward concept. You pay a monthly premium, and in exchange, the insurance company covers you for things like crashes or theft. That monthly premium depends on a lot of things, including your age, your gender, where you live, how much you drive, and, importantly, your driving record.
The more speeding tickets and car crashes on your record, the more of a liability you are to an insurance company. And if you’re a bigger liability, the insurance company will charge you a higher premium. This leads to people avoiding insurance claims for things like crashes, instead opting to have the damage fixed under the table—that is, without getting insurance companies involved—as to keep their rates down.
According to a new survey from LendingTree, over a third of drivers questioned would rather eat the cost of the damage caused by a crash than have their insurance—which they pay for—cover the bill. And an even greater number of people have admitted to paying out of pocket to keep their rates down. From the survey results:
Insurance is designed to be a peace of mind. For some, it’s a source of fear.
A little over a third (35%) of our insured drivers have avoided filing a claim because they were afraid their premiums would go up. A similar LendingTree survey found that 39% of drivers opted to pay out of pocket for car repairs after an accident. Of those, 42% said they didn’t file to avoid a rate increase.
Interestingly, this number swung wildly depending on the age group surveyed. According to LendingTree, 78 percent of baby boomers said they’ve never avoided filing a claim due to fears of a premium increase. That percentage falls all the way to 44 percent for Gen Z drivers, with Millennials following closely behind at 43 percent.
Source: Brian Silvestro
There are some instances where it’s probably better to avoid calling your insurance company, like if you cause superficial damage to your own vehicle (LendingTree mentions rubbing against a guard rail or bumping a light post as fine examples of this). There’s no reason to add curbing your wheels or bottoming out your front lip to the record if you don’t have to.
It’s also important to note that not all claims will be held against you. If you have comprehensive insurance—the type that covers your car for non-collision incidents like theft, vandalism, hail, flood, or fire—LendingTree says that most companies won’t raise your rates for those types of claims. So make sure to check your policy before swiping your credit card for a huge repair bill. In the long run, the math might not work out.
The survey also asked about the rising costs of insurance, with some fascinating results. Over half the people surveyed (54 percent) said that rising premiums have them considering cutting back insurance coverage. And 48 percent of those surveyed said that financial constraints have them considering the same. And 58 percent say auto insurance “is a financial burden.”
Source: Brian Silvestro
Considering some of the rates I’ve been quoted recently, I’d agree with these people. I remember trying to get my old Mitsubishi Lancer Evolution comprehensive insurance a couple of years ago, only to learn it would be several thousand dollars for six months of coverage (I have no accidents or speeding tickets on my record). So I settled for the basic liability-only stuff required by law in New York, where I live. It’s tough out here.
The most surprising statistic from LendingTree’s survey is the sheer number of people who have driven with no insurance at all—something that’s fully illegal in every State except New Hampshire. An entire 30 percent of the folks surveyed say they’ve driven with zero coverage in the past. Millennials were most likely to pull this off, with 40 percent of those surveyed having admitted to doing it. Weirdly, 43 percent of parents with kids under 18 years old admit to driving without insurance.
Here’s some controversial advice: Don’t do this! Driving without insurance leaves you personally liable for any damages you may cause to your car or someone else’s. You’d also be responsible for covering medical expenses for injuries, which can easily reach tens of thousands of dollars (or more). Insurance might be expensive, but going into generational-level debt because you didn’t want to pay a few hundred bucks for your premium is not the move.
Not to sound like I’m from Facebook, but you can’t tell me that a service you are legally required to pay for but are punished for receiving any benefits from is not legalized theft.
You are only *required* to have liability insurance. If you are liable, you are liable, and you would be insanely stupid to not use the coverage you are paying for. And since that insurance is only applicable when YOU fuck up and damage someone else’s stuff, you rightly should be penalized for causing an accident that results in damage to other people’s stuff. And if you don’t like it, nearly every state offers a way to self-insure, often by means of posting a bond with the state. It’s not cheap, but it does take the profit away from the insurance industry if you don’t like paying for their service. Heck, in Florida you don’t even need to post a bond, you just have to file a statement of net worth and some other documentation. Of course, if you cause an accident and get your ass sued off – good luck! Hope your net worth is legit. https://www.flhsmv.gov/insurance/self-insurance/natural-person/
Personally, I have had a few comp and collision claims not involving other cars, and my rates have never been affected. So I don’t worry about it at all.
My BIL was an actuary for awhile and highly recommended dealing with insurance companies as sparingly as possible. He almost always paid out of pocket if something happened to a vehicle in his household, including a $9K bill when my sister bumped into a concrete wall in her Infinity QX80.
Curious, did the study ask if the unreported claims were less than the deductible on the surveyed folks’ policy? I could see that being a reason, done it myself. But that’s likely not the majority of cases from the sound of things.
i dont live in the US, but does insurance there works differently? reading this article and all these comments makes me think so, that or people really dont know how insurance works
insurance cost in my country is not as high, and individual premiums dont go up for single incidents and policies are not cancelled unilaterally.
granted, claims may be denied, but usually according to policy conditions
full disclosure: i work for an insurance company
In the US just about anything can make your premium go up. Your claim can also be denied for a lot of reasons. Just like everything else in the US the insurer making money seems to be the primary concern.
i see, denials should be tied to policy conditions, but i guess it do is an US thing
insurance making money, well its a business after all, but what seems strange, to me at least, is that premiums are not an income for the insurer, that money should go to the reserves, and some part of that is invested, and some part the returns from that investment can be recognized as an income, almost all of the premium amount is held by the insurer, but its not money they can use… i mean, it obviously generates more money, but not directly as they are required by law (at least in my country) to hold on that money, and at least another similar amount, to face any potential loss due to a claim.
but if it does work differently in the US, then yes, greedy corporates just want the money, what a shame
Oddly enough, the vast majority of insurance companies are for-profit businesses, not charities. So you are damned right their making money is their primary concern. Same as about everywhere on the planet.
And the average idiot has NO IDEA how any of it works. No it doesn’t work differently than other places. Your claims history goes into the insurance rating that they use to set your rates (each company has a slightly different system, but they are all basically similar). In most cases, you get credit for every year you go without a claim, and of course claims (generally other than not-at-fault comprehensive claims) are of course counted against that rating. And where you live and your driving record factor into that rating as well. It’s not actually all that mysterious how that works.
Insurance actuaries are THE Zen masters of statistical data analysis. They have a very good picture of what your claims history is likely to be based on who you are, where you live, and what you drive. And they charge you accordingly. They are actually VERY good at forecasting the future when it comes to how likely you are to make them money or cost them money.
I have never once heard of an auto insurance claim being denied as long as the insured actually had that type of coverage. You can, of course, get into some pretty good fights as to who was at fault in a particular accident though. If that bothers you, get a dash cam. Of course, that can screw you as easily as help you.
In the U.S., we get zero visibility whatsoever into why insurance rates are raised. Most companies will raise your rates every year, but the amount varies a lot. Once you’re older than about 25, your rates will only go down when you switch providers, and typically not by much. So any rate increase is effectively forever.
You need an awfully big claim to offset an increase of a few hundred a year for the rest of your life.
where i live rates go up but are usually tied to inflationary rates, like less than 10%. also rates are way lower, comprehensive insurance for my 2023 prius is like the equivalent to 650 dollars a year, including liability, theft, accidental loss and some other quirks
liability only is way cheaper, and its required by law
i guess it does work differently in the US than other countries
No, this is how it works in the US also.
You pay what I pay on my BMWs and Mercedes, and two of them are insured in one of the more expensive states. I would be awfully surprised if rates don’t vary wildly depending on who you are, where you live, and what you drive, same as here. The other countries I am familiar with are the UK and Hungary, it’s WAAAY more expensive in the UK, and far more restrictive as to what you can do with your car than in the US. Hungary is cheaper – but the people are also a lot poorer.
My mother lost a car to a hurricane a few years ago. I handled the claim, along with most of the rest of her finances. The insurer payed out rather more than I thought the car was worth in less than two days. Zero complaints, and her rates did not go up since it was a no-fault comprehensive coverage claim. Her rates are notably higher than mine, but she is elderly and has had two at-fault accidents (thankfully minor parking lot stuff) in the past five years. She pays about $1200/yr for a ’22 KIA Soul – which is actually still on the cheap side for this state.Per Google, the state average is around $3600 for full-coverage (liability, comp and collision). Lots of crazy drivers, lots of uninsured drivers, lots of natural disasters. Also, the “average” Floridian lives in a FAR more urban area than we do, and rates are always much, much higher in cities.
Insurance rates for me went down most every year until the recent inflationary times. Now they have remained mostly the same (I count that as a win), albeit I raised my deductibles (and also my liability limits), since I can afford to easily. Rates are going up for everyone because the cost of EVERYTHING is going up, from fixing cars to fixing people. Especially the cost of fixing people – or have you not been paying attention the past decade or so? There was a time when a minor fender-bender was a $100 fender, some paint and labor, and a $10 headlight. Today it’s a $2000 headlight, $1000 in sensors, a $1000 fender, and $2000 in paint and labor, now that it all has to be environmentally friendly in a special gazillion dollar paint booth. And God help you if you injure someone and even so much as send them to the ER for a checkup, never mind surgery or a hospital stay. A simple broken leg can be $50K+. And if you are at-fault, you are not getting those sweet negotiated hospital rates that the health insurers get – you are paying full retail.
It takes very, very little to have a claim that would utterly bankrupt you without insurance. Been to the hospital lately? If you cause a crash and injure someone, those medical bills are on YOU.
I would argue that insurance coverage in the US is NOT expensive as a general rule, considering in this country if you injure someone with your car and are at fault, you are potentially on the hook for *hundreds of thousands of dollars* in medical bills. Auto insurance is PRIMARY for covering accident related injury costs, even if the injured has medical insurance of their own.
As an advancing middle-aged dude living in homes I own in quiet boring suburbia with a bunch of relatively expensive daily drivers and a SQUEAKY clean driving and credit record, and no at-fault accidents in a couple decades, I pay about $600/car/year averaged out for full coverage with high limits and moderate deductibles (two daily drivers, three cars on limited use policies). One of my homes where two cars are insured is in a state that is actually very expensive relatively speaking for insurance. The other is in a much cheaper state. If you are a dumbass kid with a hot Mustang, living downtown with terrible credit and with a slew of tickets and a totaled car in your past, well, you are going to pay for that for a good while.
I have actually never heard of an insurance claim being denied here in the US, unless you don’t have the type of coverage that the claim would require. For example, you have an at-fault accident but don’t have collision coverage on the car. I’m sure it DOES happen, it’s a big country with a massive number of insurance companies – but it would be pretty unusual, and auto insurance IS a highly regulated industry (though of course, that varies by state).
The average idiot in the US has no idea how much of anything really works.
It also pays to shop. Some carriers actually penalize loyalty. I had my vehicle coverage with a large carrier that was once known for great service, I haven’t had a claim of any sort for decades, have excellent credit, bundled my house, and drive all the cars collectively less than 10K miles a year. Still, it kept going up, and up, and up. I finally opened my eyes, shopped around, and am now with a highly rated carrier, paying 1/3 as much for the same or better coverage.
Still… my day job has a lot of overlap with risk management. Some of the utterly petty crap that insurers pull is insane, occasionally to the point of spending dollars to save nickles and dimes.
Sometimes it’s just not worth the hassle dealing with insurance and body shops for minor damage.
Best bet figure out the most you are willing to pay out of pocket and buy insurance with that as the deductible. That way the premium is a lot less but you are still covered.
Exactly. In well-funded middle age where dropping a couple grand is not an emergency in any way, I don’t need that $200 deductible anymore. I see both car and homeowner’s insurance as things for catastrophic events, not minor inconveniences.
But also as someone who is lucky enough to have a very decent net worth, I carry *massively* larger liability limits (plus an umbrella personal liability policy) than I did when I didn’t have two nickels to rub together and was effectively judgement-proof. But higher limits cost less than you save with higher deductibles. There is a cost to a claim that the insurance company has to account for, and higher deductibles save them dealing with those piddly claims.
Understandable. Insurance companies aren’t run like they were intended, and used to be. A claim, any claim, is an invitation to cancellation. Hell, try making a claim with home insurance, see what happens.
I once had a fire claim on a home. When I went to rent the place out a couple years later the insurance company dropped me because the policy change allowed them to. The agent couldn’t find me coverage, then had the gall to warn me that the coverage I actually could get wasn’t good.
Home insurance is insane. At my first house I had a tree branch fall through the garage in a storm. I started into the claims process and then decided not to file as I could fix it outright for roughly the cost of the deductible.
Over ten years and two different insurance companies later, I had significant damage from another large tree falling on the house itself during a derecho. By this time I was renting it out and had structural insurance only. When the adjuster showed up he still grilled me about that branch through the garage.
I’m certainly hesitant because insurance companies seem to be looking for any excuse to raise rates.
Last year I hit a coyote with my Mazda 3 and obliterated the front bumper. I basically had no choice but to make a claim and figured I’d somehow get screwed, but was pleasantly surprised when insurance told me straight up this won’t affect my rates.
Forget rate increases. Cancellation has the higher probability.
Yeah, and then the next company charges you the higher premium because now you have a claim history.
I was just speaking with my co-worker this morning about this very thing. He’s been with the same insurance company for over a decade. His daughter borrowed his car and got into an accident recently – the only hit on his policy in that time frame. Regardless of all the premiums he has paid to that company over the last ten or so years (the amount he paid in is much higher than the cost of repairs), they still dropped him.
And people wonder why I hate insurance companies.
Is it the same shit in other parts of the world?
No. Other parts of the world, other first world economies, haven’t been bowled over yet by American business school MBA thought. Whether they’ll achieve the same ‘race to the bottom’, scorched earth policies as American corporations is yet to be seen.
Looks like insurance companies have won. They’re officially mobsters. Pay protection. Scared to use it.
If the mob existed, which it doesnt, they would be perfectly fine with you calling in their protection
And that’s exactly how the insurance industry likes it
Of course, body shops are increasingly coming under the control of big, national chains or car dealer groups, which often don’t want to take on any work that ISN’T insurance covered, so, if you do want to pay cash, you have to find one of the dwindling number of independent shops that’s also reputable
This is part of the reason I put a deposit down on the Slate Truck. User replaceable, unpainted, plastic panels? Hell yeah.
Well, that, and it was a whopping $50…
Doesn’t help everyone else. Anyone try and get a quote on a complete respray lately? Most (all) shops will refuse to do such work now. They’d rather do insurance work. The couple of body shops that said yes, quoted me $12K for a complete respray, in and out.
Just had an experience with a shop that only takes insurance. They wanted $4,500 to fix a single dent and another $4,500 to fix a peeling paint issue on a couple spots. They literally said, “the hourly rate is lower if you use insurance”
So, you want $9k to fix a single body panel on a fucking Ford Fiesta. L O L. Local independent shop quoted $2,600 to fix every little minor thing wrong on the entire car.
Who knew having to deal with insurance companies for payment was so much easier than cash.
That’s because the insurance companies are required to repair it to new quality.
I ran into this with some rust I wanted fixed. Most of the body shops said they’d need to install a whole new 2013 Malibu side panel to fix the rocker panel rust. Being certified to do those repairs means body shops must do all repairs the same.
I’m not living in the US, but my insurance refused to propose more than liability only.
The reason is that the car is 33 years old and they can’t even source a new windshield if needed…