Auto insurance is one of those unique products that you buy and you don’t ever want to use. Since the financial contract is only designed to really benefit you after you experience an accident or another type of catastrophic event, it’s a product that you file away and hope not to use for the entire life of the policy.
Unfortunately, no matter how careful you are and how little you drive, it’s always possible to get into an accident. Statistics show that more than half of the accidents reported to insurance companies happen within five miles of the driver’s home.
If you have an accident, it’s important to assess whether or not it’s worth it to file a claim. Since claims can affect your driving record and insurance rates for years, it’s best to educate yourself before you call your insurer:
What is the difference between a first-party and a third-party claim?
There are two types of claims that you can file after an accident. You can either file a first-party claim or a third-party claim.
A first-party claim is a request for benefits by the policyholder against their own auto insurance coverage. A third-party claim is a request for payout for medical bills or auto repairs against someone else’s insurance policy.
When can you file a first-party claim against your insurance?
You aren’t always eligible to file a claim for benefits under your own insurance.
First, if you’re filing a first-party claim, you need to be sure that you have first-party coverage options. In most states, first-party coverage that pays for the expenses that you incur after an accident isn’t required.
If you don’t have the right coverage and you have an at-fault loss, you’re on your own.
You need to verify that you have coverage before filing a claim. If you’ve suffered a loss to your vehicle and you need to get repairs done, you must have the appropriate physical damage coverage. If you’re injured in an accident, you must have first-party medical benefit coverage options.
Here are the types of coverage to look for:
- Medical Payments Coverage
- Uninsured Motorist Protection
- Personal Injury Protection
When can you file a third-party claim against another driver’s policy?
If you’re not to blame for the loss and the other driver was insured and identified, you can file a third-party claim against their policy. In fact, when you call your insurer to file a claim and the claim is investigated, the adjuster will attempt to collect from the at-fault party’s coverage after fault is completely allocated.
Typically, any time you’re in an accident where you’re less than 49 percent at fault, you’ll be filing a claim for third-party benefits against a driver’s liability coverage.
Their Bodily Injury coverage will pay for your medical bills and their Property Damage coverage will pay for your vehicle repair. If you can’t identify the driver, you’ll file a first-party claim.
How will a claim impact a driver’s rates?
Not all claims will have a negative effect on your policy. All third-party claims filed against someone else’s insurance are classified as not-at-fault accidents. While these claims will still be reported on your claims record, they don’t come with a surcharge and a single incident won’t change your risk class.
First-party claims can become complicated. If you’re at-fault in the loss, your policy will have a surcharge at your next renewal and you could fall into a higher-cost risk class.
If you were not to blame for the loss but had to make a claim against your insurance, you shouldn’t have to worry about the claim being chargeable on your next renewal.
How long will an insurance claim raise your rates?
If you have a chargeable claim on your record, that claim could hold you back from getting the best rates for as long as 3 years. In most states, a company can only legally surcharge a claim on a driver’s record for up to 36 months after the claim is closed.
If you have more than one loss or a combination of traffic infractions and accidents, the claims record could have an impact for longer than you expected.
It could take several years for you to regain discounts and to climb out of a high-risk driver classification because you’ll have to wait for multiple blemishes to fall off of your record.
How long will the company have a record of the claim that you’ve filed?
As you can imagine, insurance companies have to take and investigated hundreds of thousands of claims every year when they have a large book of business. Storing information in the insurer’s limited database forever isn’t realistic.
This is why most companies will only keep basic information the claim after it’s been settled for a full 3 years.
How long will the claim show on your official claims record?
Companies may not keep your claims record on your company-specific report for long, but all claims data is transferred to your universal claims record so that all insurance companies are able to access your file. Almost all insurers that sell personal policies will report the data to LexisNexis in your C.L.U.E. report.
C.L.U.E. stands for your Claims Loss Underwriting Exchange report. The database stores information that can be accessed by using a driver’s license number or name.
All insurers can see if drivers have at-fault claims, how much the insurer paid, and who was driving at the time of the loss. Records can be accessed for seven years.
If you have a minor accident, it might not be worth it to file a claim. You’ll have to consider how much the claim will affect your rates over the next three years. Get online comparison quotes to estimate how much you’ll pay and then make an informed claims filing decision.