Be done with it, if you can
The Call
Wayne didn't know what to do when he called Monday evening. He told me that he'd backed into a friend's car causing $1,200 in damage to the bumper plastic and paint.
I said, "Write a check and be done with it."
Wayne's original idea was to have the friend get a couple of different estimates, compare them to the original, negotiate a settlement, and then hope nothing else comes up. He was trying to protect his financial interests, which is good thinking.
Again I said, "Write a check and be done with it."
What Insurance Is Actually For
Many people would let the insurance company handle the damage and payment. That's why we have insurance, right? Hold on — that is not why we have insurance. Let's get that straight. Insurance is to protect us from severe financial hardship. Insurance premiums are based on risk, so claim history impacts rates.
Insurance is designed to protect us from catastrophic financial risks, not small expenses.
Health insurance keeps us from going bankrupt if we have major health issues. Car insurance protects us from severe liability if we are at fault for personal injury or major property damage. Home insurance protects our finances if our house burns down. You get the idea.
What Filing a Claim Would Actually Cost
The insurance company would put a mark on Wayne's driving record and would note an accident report on his friend's car. This would affect Wayne's insurance premium and could impact his friend's resale value — think Carfax. Even if Wayne's insurance wasn't immediately impacted, this blemish on his record would be devastating if there was another incident, and it would guarantee higher premiums. Remember, insurance companies always get their money.
While Wayne wants to ensure his interests are protected, getting more estimates would be aggravation for his friend. Think of how much time it takes to get a car to multiple body shops for the sake of saving a couple hundred bucks. Getting estimates also prolongs the anxiety of knowing there is an issue looming.
Why This Isn't a Big Deal for Wayne
Wayne's car was only scratched slightly, and because he drives an inexpensive, paid-for car, the scratch on his end wasn't anything worth getting upset about.
The damage he caused to his friend's SUV was $1,200. Add in a rental car for $300 and all of this gets rectified. Do you know why else this isn't a big deal? Wayne has a $20,000 emergency fund, which makes $1,500 just annoying.
Wayne is a sincere and kind guy — he didn't back into his friend's car intentionally. A warm apology and a check for the damages means he doesn't need to wonder about what happens next. This is an annoyance, not much more.
Why This Works for Both of Them
Wayne is going to pay the repair and rental car bill. The friend will sign a release of future liability. This way, there's no recourse in the future, the insurance company is none the wiser, and the friend's car doesn't end up with an accident history.
What This Actually Comes Down To
Ask an advisor, coach, or mentor when stuff happens. You're too close to your own situation to see it clearly — that's not a flaw, it's just how stress works. Wayne called me before he did anything, not after. That's the move.
Have an emergency fund. This is the whole reason $1,500 was an annoyance instead of a crisis for Wayne. Same accident, no fund — now you're stressed, maybe putting it on a card, maybe resenting your friend a little. The fund didn't just cover the bill. It bought Wayne his peace of mind.
Protect yourself legally by getting a release if you settle outside of insurance. A handshake and a check feel generous, but get it in writing. You're not being paranoid — you're making sure "we're cool" stays true a year from now too.