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Mobility When is it worth paying for a car repair yourself, instead of making an insurance claim?

I got a brand new CR-V and misjudged a corner in the parking garage and scraped the whole side of my vehicle from front to back. How do I know when it’s worth paying for the repair myself instead of making an insurance claim? We really had to save to buy this SUV and money is tight.– Brittany, Oshawa

If you make an insurance claim to save yourself from a financial scrape now, you could end up spending far more on insurance premiums down the road.

“Loosely speaking, if the cost to fix is under $2,000, it can be touch and go to claim it – and if it’s over $2,000, it’s worthwhile most of the time,” says Adam Mitchell, president of Mitchell and Whale insurance brokers in Whitby, Ont. “But step one is an estimate – you need to know how much the claim is for.”

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First, check if you have collision insurance – which isn’t required (neither is comprehensive insurance, which covers theft, vandalism and damage caused by falling or flying objects) – although you’d have to pay the deductible, which is typically $1,000.

“If you have a $1,000 hit and a $1,000 deductible, then you’re not saving anything by making a claim,” Mitchell says.

Additionally, if you have an at-fault crash – even if it’s just between you and a parking lot corner – your insurance company can use it to raise your rates, even if you don’t actually make a claim.

If you’re dealing directly with the insurance company, just telling them about the accident can be enough for them to hike your rates, even if they don’t pay you anything.

“If it’s with their representative, as soon as you ask a question it goes on the record,” Mitchell says. “We had that happen with someone who called the after-hours line – he’d hit a table in the highway and their rating went from six stars to zero.”

There are exceptions. In Ontario, the Insurance Act says your company can’t increase your rates for a minor collision if the damage to each car and to property (including parking lot corners) is under $2,000, nobody was hurt and the at-fault driver pays for repairs.

The rate escape?

If you can’t afford to pay for the damages now, you may have no choice but to make a claim – especially if you can’t drive your car without the fix.

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Also keep in mind that there might be other costs that could drive up that estimate, including a rental car if your car is in the shop for a few days.

But making that claim now could impact your rates later, especially if you’ve already had accidents.

Insurance companies assign ratings to drivers based on how long they’ve gone without an at-fault accident. While the exact rating system varies between companies, many use a six star system. If you’ve had no at-fault claims in six years, you get lower rates.

“If you are a six-star driver, your first accident would knock you down to a five star and your rates would go up 20 per cent,” Mitchell said. “If you have a second, you’ll go down to zero stars – and get ready for your rates to double or triple. That could be $6,000 a year.”

If it’s your first accident, check to see if your policy includes accident forgiveness. The company will take your first accident and, as far as your insurance premiums go, ignore it.“You have a free strike,” Mitchell says. “It will be as if the accident never happened, but you’ll use up that forgiveness – you’d hate to use up that first strike on a $100 at-fault claim.”

Faulty reasoning?

If you’re paying for the damage to your car, or for damage you cause to other vehicles and property, the accident won’t impact your rates if you reside in provinces with public insurance such as British Columbia, Saskatchewan and Manitoba.

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In the rest of Canada, most insurance policies require you to inform the company of any collision, even if you’re paying for the damage yourself, said George Iny, president of the Automobile Protection Association (APA), in an e-mail.

There are exceptions. In Alberta, for instance, you don’t have to tell your insurance company if the damage to your car was less than your deductible, as long as there were no injuries or property damage.

“If paying yourself, be aware that if a collision repair shop uses collision estimating software, it will likely trigger a report to an insurance database,” Iny said.

Have a driving question? Send it to globedrive@globeandmail.com. Canada’s a big place, so let us know where you are so we can find the answer for your city and province.

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