Understanding Your Insurance Policy

Hopefully you'll never need the advice in this section, but most drivers will be involved in at least one fender bender and wonder how and whether to file a claim. For any accident that is your fault and results in a $400 to $500 payment by your insurance company, your rates are likely to rise for the next three years.

Deciding whether or not you want to file a claim is just one aspect of the claims process. If you're like most people, you've probably already missed out on the first stage — what to do before you've had an accident.

Before the Accident

Most drivers don't think about car insurance until they need it. But it's helpful to understand what your insurance policy does and does not cover before you need to utilize it. If you haven't done so, it's still important to understand the following stipulations before you make your claim:

• Rental charges: Will you be compensated for a rental car while repairs are being made to your vehicle? If not, consider adding this provision to your policy — a week's worth of rental charges can effectively double your deductible.
• Deductible amount: A lower deductible means higher premiums, but it also means you'll pay less cash if you're involved in a costly accident. Consider the trade-offs between high and low deductibles in both minor fender-bender and larger collision scenarios.
• Gap insurance: Do you have this coverage? Gap insurance pays the difference between what you owe on your car and what it's actually worth.
• Repair work: Can you use your favorite mechanic for repairs, or only a select few? What if the accident occurs while you're out of town?

Immediately After an Accident

After most accidents, drivers should follow these steps:

• Call the authorities: This step isn't always required (backing into another car in a mall parking lot doesn't necessitate calling the cops), but calling the police is a good idea after any significant accident on a public road. Police officers have experience dealing with emergencies and can file an accident report immediately.
• Exchange contact information: Get names, addresses, telephone numbers, license plate numbers and insurance policy details of the other driver(s) involved before you leave the scene. It's also a good idea to get the contact information of any witnesses who stopped to offer assistance. Many drivers find it useful to stow a disposable camera in the glove box for documentation purposes.
• Talk to your agent: Call your insurance agent before you leave the scene. He or she can guide you through the important steps you otherwise might forget in a rattled state of mind.