Should You Report That Fender Bender?

With the cost of automobile insurance on the rise, it's tempting to ignore a minor fender-bender rather than face the premium hikes that may follow if you tell your auto-insurance company. Is that a wise decision? Sometimes it is, sometimes it isn't, the insurance experts say. Here are some considerations to weigh.

If you’re at fault, your rates will rise by roughly 40 percent of the company’s base premium rate -- not your discounted rate -- though some firms do base rate increases on individual premiums. (When shopping for auto insurance, ask how rate increases are determined before you buy.)

You should always report an accident in which you are clearly at fault. When you rear-end another car, for example, 99 times out of 100 it's your fault. If your insurance company wasn’t notified of the accident and the driver chooses to sue, you may have to fight the lawsuit and pay any judgment out of your own pocket.

What if you have an accident in your car, with no other passengers? If the damage is minor, you may elect not to report it and pay to have it fixed out of your own pocket. Doing so may make sense for two reasons:

• First, if you’re accident-prone and you’ve already filed a number of claims with your insurer, you risk having the company cancel your policy by filing a claim for minor damage. Finding another insurer may be difficult, and your premiums will likely be much higher.

• Second, when you file a claim with your insurance company, even a very minor one, the incident is placed on your car’s file at auto-history tracking companies, such as Carfax Inc. That accident will show up on the auto-history report based on your car’s vehicle identification number (VIN) when you decide to buy a new car. As a result you could end up with a lower trade-in value or sale price.

That said, if you caused property damage -- such as knocking over a telephone pole or a neighbor’s fence -- in an accident involving just yourself, you're probably better off reporting it to avoid a potential lawsuit.

If an accident is clearly not your fault, reporting it to your insurance company may not spare you from a hike in premiums, insurance experts say. Your insurance company may raise your rates even if you weren’t at fault. In some states, including New York and California, that practice is illegal, but in others it’s not.

The first thing to do is call your state insurance department to see whether your insurer has the right to raise your rates or cancel your policy. If your insurer isn’t permitted to raise rates or cancel your policy by state law, report the accident. If your state doesn't have a law protecting you from increased premiums or policy cancellations in no-fault accidents, your insurance agent may be able to tell you whether your insurance company is likely to increase your premiums and how high the increase would be. You can use these estimates against the cost of repairs to decide whether filing the claim is worth it.