Is it ever okay not to involve the insurance company after a car accident?

I hear this question a lot as a broker. Clients call me after being involved in a car accident and wonder whether they should go through the official channels, report it to the insurance company, and let them handle things.

To answer your question: it is okay if you choose not to involve the insurance company after a car accident. But only if the other party also agrees.

There are three main scenarios in which it might make sense to not get the insurance company involved after an accident.

In the first type of case, the accident is minor and only involves one party. In a situation like this, it does not make economic sense to involve the insurance company. Most insurance policies come with a deductible, which you have to pay before the insurance company will pay anything on your claim. If the cost of repairing the property that was damaged in the accident is less than the deductible, there is no point reporting it to the insurance company. You are better off paying the claim off yourself and saving yourself the hassle of dealing with an insurer (consider The Pros and Cons of Increasing Your Auto Deductible).

Similarly, if you get into a fender bender with a friend or family member, you might not want to involve the insurance companies since things can get legal and complicated. With someone you trust very well, it might be better to just take care of it privately.

The third scenario is something that happens more often than you would think. If you get into a car accident with someone who drives a dilapidated car and you are likely to be deemed at fault, the other party might not be interested in repairing whatever minor cosmetic damage you caused. If either of you report the accident to the insurance company, they will simply repair the other driver's car. In this case, they might propose that you settle with them in cash so that they can spend it elsewhere. This is perfectly fine and perfectly legal. However, if you do decide to go this route, make sure you get them to sign an agreement indicating that they have been fully indemnified for their loss. You don't want to pay twice because they took your cash and reported the accident to their insurer.

Now, with all that said, let me clarify that if you suspect bodily injury is involved, you will want to involve the insurance company. Bodily injuries can have latent effects down the road and become expensive. That is not the kind of risk you want to take on by going it alone.

(Want to learn more about what to do when you decide to get insurance companies involved? See The First Steps You Need to Take After Wrecking Your Car.)