Fresh off a new parking lot fender bender (thank goodness no one was hurt!), it’s time to drill down on the money aspect of the damage. Even though I carry insurance, it’s always better to step back and look at the math to determine the best way to proceed financially. For small fender benders, it’s almost always cheaper to pay out of pocket to fix the damage than to have your insurance pay for it, only to increase your premiums down the road.
I’m a strong believer in only insuring for catastrophes, using high deductibles, dropping coverage as soon as the car has lost most of it’s value, and paying for everything else out of pocket.
Insurance Versus Self Pay
My insurance deductible is $1000. I took a look at my policy ($295), and it looks like I’ll lose at least $94 in discounts. In addition, my base premium would likely be increased for submitting a claim, we’ll assume a minimum 20% premium increase (it would probably be more), or $59 for each half year over the next 5 years. Although since I don’t have access to their rating plan, this is all just estimates based on some prior years data I saved from previous insurance claims  and violations  and years of working in the insurance industry.
So, if I choose to have my insurance pay the guy, I’d probably have to pay at least $1,000 + $1530 ($94 + $59 x 2 x 5 years). Ignoring the time value of money (which is probably offset by the compounding value of the regular increase in base premiums anyways), it’s probably in our best interest to foot the bill myself if the damage estimate is anything less than $2530. Anything around that number and it could be a toss up, significantly above that, and I might want to get insurance involved.
Replacement Parts and Estimates
My husband found a replacement part for my car for $280 on ebay . Of course, I had to hit a luxury car, so I’m guessing the other party probably won’t endorse buying parts on ebay or just living with the scratches like I plan to! Even though my rear bumper crumpled easily like a styrofoam cup and my car took most of the damage, I’m sure his estimate will be significantly higher to replace a headlight and scratches in the paint.
Humor me… what do you think his estimate will be?
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