Is it better to pay for vehicle damage yourself?

Small scratch on the car, big risk? If you call your insurance company for minor damage, you could be held accountable with higher premiums or cancellation of your policy. A well-considered approach saves money and hassle.

Does the car just have a scratch or is it a total write-off? Were only a few tiles blown away by the storm or is the entire basement under water? And what if you accidentally caused damage to a third party – but only so marginally that paying for the damage out of your own pocket wouldn't hurt?

In the event of a claim, you may start to wonder: is it worth getting the insurer involved or does it make more sense to settle the claim yourself? After all, providers can often increase the premiums or cancel the contract after a claim has been settled. Taking this risk is therefore worthwhile, especially in the case of larger amounts of damage.

The amount of damage is not the only factor. The assessment therefore varies from case to case and from insurance sector to insurance sector – this makes the evaluation complex.

The fact is: The possibility of extraordinary termination after the settlement of an insured event is laid down in the Insurance Contract Act. Both insurers and insured parties can make use of this provision.

Weighing things up

However: “There is no general answer to the question of when an insurer will exercise its right of termination,” says Claudia Frenz from Association of Insured Persons (BdV). However, you should be aware that this can happen. Regardless of whether it is residential building, private liability, legal protection or home contents insurance. The only exception is motor vehicle liability insurance, which the insured person may not cancel after a claim has been settled.

Peter Grieble from the Consumer Advice Center Baden-Württemberg advises insured persons to report damage to the respective insurer. “That's why you took out insurance.” Grieble sees exceptions to this rule primarily where the amount of damage does not exceed the insurance deductible. In such a case, insured persons bear the damage themselves anyway – even if they involve the insurer.

It is also sensible to check how many claims have been reported to the respective insurance company in previous years. “If there have been few or no claims reported, there is hardly any reason not to report a minor claim,” says the consumer advocate. If the list of claims reported is long, insured parties should consider covering the claim themselves – because then the risk of cancellation or premium adjustment could be increased.

According to Claudia Frenz from the BdV, insurance should primarily serve to protect against existential risks. However, policies are not intended to be a self-service shop for settling all (minor) damages. That is why she always recommends agreeing on a deductible when taking out insurance. This way, customers do not even try to call in the insurance company in the event of minor damages.

Buy back damage?

You should also consider: How important is the respective insurance sector? The more important it is, the more you should weigh up the advantages of a claim settlement against the possible consequences. For example: for less valuable vehicles, comprehensive insurance is far less important than, say, private liability insurance for the vehicle owner. In the event of a settlement, the loss of comprehensive insurance would also be much easier to cope with than the loss of private liability insurance.

But it doesn't always have to be cancellation that threatens after making a claim on an insurance policy. Another common variant: an increase in premiums or a downgrade in the no-claims bonus class (motor vehicle insurance). Another disadvantage here: with the exception of motor vehicle insurance, it is not possible for the insured to predict whether and to what extent a premium adjustment can be made after a claim has been settled. According to the German Insurers' Association (GDV), this is because insurers base their decisions on different guidelines.

According to Claudia Frenz, at least with car insurance, the insured can have their provider calculate what is cheaper in the event of a claim. Either settling the claim through the insurer including a downgrade, or paying the third-party liability or fully comprehensive damage out of their own pocket. Even if the insurance company has already covered the damage, according to the GDV, it is usually still possible to buy back the claim at least six months later.

Save the existing police

Reassuring for policyholders: Even in other insurance sectors, those affected are not completely powerless in the face of cancellation or premium increases. The key word is contract restructuring. According to Claudia Frenz, the contract can often still be saved by agreeing to or increasing a deductible.

For this purpose, it is also conceivable to exclude previously insured services if the rest of the contract otherwise remains in place to the same extent. Insured persons are not entitled to such a contract restructuring, but it doesn't cost anything to ask.

If the insurer persists in terminating the contract despite all efforts, the insured should ask whether the insurer will withdraw the cancellation in exchange for a cancellation of their own. “Then you don't have to state in your next insurance application that you have been terminated,” says consumer advocate Peter Grieble. This can make it easier to conclude a contract with another insurer.

After the insurer has terminated its contract, a new police force sometimes has to be bought under more difficult conditions and with higher premiums, says Claudia Frenz. “This can be the case with home insurance, for example.”

However, it is unlikely that no one will want to guarantee you after you cancel. “The business purpose of insurers is to insure, not not to insure,” says Peter Grieble. He therefore advises staying calm and, if in doubt, calling in an insurance broker or fee-based advisor.

What is never a good idea, however, is to conceal claims or cheat in some other way when the new insurer asks about your claims history. This puts your insurance coverage at risk.

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