While you hope you never need to use your car insurance policy, odds are that you will. When you have an accident or your car is stolen or suffers some other mishap, you should already have a plan in place for what to do.

The decision about filing a claim begins even before you buy the insurance, and you should have answers to these questions:

  • What are the coverage terms and limits of the policy?
  • How much money can you afford to shell out of your own pocket, and what's the market value of your vehicle? These two answers will govern the size of the deductible you select for the collision and comprehensive parts of the policy. If you have a $1,000 deductible, for example, you'd pay the first $1,000 of the repair bill and insurance would cover the rest. Check out our Car Insurance Glossary for more on deductibles.
  • Will your insurer raise your rates or even cancel your policy if you're in an accident? You need to know this before you buy the policy. It should be spelled out in the policy but you should make sure you speak to the insurer's representative and get an explanation in language you can understand.
  • If you file a claim, what is your insurer's policy on the type of repair parts that will be used to fix your car? Few people worry about this at the time they buy a car insurance policy. They should -- check out our Car Inurance Secrets: Repair Parts guide to learn why.

Some insurers say they will give you a "freebie" and will not raise rates or cancel your policy after your first accident, even if it's clearly your fault. Other insurers aren't so charitable.

If you know your insurer's cancellation and rate-hike policies, you then can decide in advance what you will do if your vehicle is in an accident.  

Another basic rule is to call your insurer whenever you're in an accident. Keep in mind that contacting your insurer and filing an insurance claim are two separate actions. It's important to establish that your actions are prompt and responsible. Telling your insurer what's going on is the sensible course.

Here's a list of questions that you should ask your insurer, according to the Insurance Information Institute, a trade group funded by insurance companies:

  • Does my policy contain a time limit for filing claims and submitting bills?
  • Is there a time limit for resolving claims disputes?
  • If I need to submit additional information, is there a time limit?
  • When can I expect the insurance company to contact me?
  • Do I need to get repair estimates for the damage to my car?
  • Will my policy pay for a rental car while my car is being repaired? If so, how much?

Now, if the accident involves personal injuries and medical costs, it is almost certain that you will need to file a claim.

If you're fortunate and only physical damages are involved, then the next bit of information you need to know is what kind of repair bill you might face. Here, there is no substitute for having a car repair shop that you know and trust. In most cases, your insurer cannot dictate who repairs your car. That's your call. You need to get a repair estimate you trust before you can decide whether to file an insurance claim or pay for the repairs yourself and avoid a claim.

If the accident involves another vehicle, you will probably exchange proof of insurance cards with the other driver and write down the relevant details. Contact your car insurer right away, and do it at the scene of the accident, particularly if there is a police report involved.

If you think the other driver was responsible for the accident or if you have any important disagreements with the other driver, call the police and request an officer at the scene. The police don't attend every fender bender but in multiple-car accidents, their reports may be crucial to determining and assigning blame for the accident.

If damages are minor and you think the accident is your fault, you may be tempted to avoid filing a claim and just agree to pay the other driver's repair bills. This is one of those decisions that insurers and "experts" will caution you against, but it's done lots of times every day.

The choice is yours but you need to get the other driver to sign a statement that says they have received "X" dollars (the specific amount of the repairs), that this satisfies any obligation you may have to them and that they will not seek further payment or damages from you. Without such an agreement, they might come after you later, and if you haven't filed a claim, your insurance company may not be legally required to defend you from such a charge.

If the accident is their fault, they may make a similar offer to you. Just make sure you are satisfied with the repair estimate on your vehicle and that you trust the repair shop to do a good job. Don't sign a waiver agreement until you've received their money for the repairs and your car has been fixed to your satisfaction.