Paid out of pocket for a fender-bender? Fine, but the law says you have to tell your insurer

You’re mount into a parking blank when you try it — that dreaded cranch, the go of your fender clawing its way across concrete.

With cars now akin to computers on wheels, that scraped fender might actually eat into the thousands, thanks to repairs for a back-up camera and sensors (which apparently you didn't use in this instance).

But even if the cost is more than your deductible, the first instinct is not always to put a claim through your insurer. In fact, a recent poll of 1,000 people commissioned by Cost of Living found that 43 per cent of those who had a crash in the last five years chose to pay for repairs out of pocket — and of those, 57 per cent said they wanted to avoid a bump in their premiums. (The margin of error in the poll was 3.1 percentage points, 19 times out of 20.)

But that raises a larger issue, legal and insurance experts say: Drivers are considering only the short-term costs, leaving themselves exposed to personal injury lawsuits, voiding their insurance policies and significantly higher premiums in the future — if they're even able to find a company to take them on.

That's because it's against the law not to disclose an accident to your insurer, even if you ultimately decide to pay for it yourself.

But for some reason, "most people do not understand" that this is a legal responsibility, the Insurance Bureau of Canada's national director of consumer and industry relations told The Cost of Living.

"Anecdotally, people likely spend more time researching a one-week vacation than they do investigating the insurance for their home and their vehicle," Rob de Pruis said.

It's mandatory because that information is crucial to assessing a driver's risk, he said, adding if people are underreporting accidents, it can be challenging to ensure the individual premiums being charged cover the needs of the collective.

De Pruis points to a recent industry report in Alberta, which found that for $100 in premiums collected by insurers, they were paying out $118. While the reasons for that are complex — including the fact that the province has set a cap on what's charged for premiums — he said companies rely on self-reporting data, alongside other research and risk analysis.

De Pruis said while he understands people worry about the extra cost, acknowledging that premiums usually rise each year, one collision might not tip the balance — especially given the rise in collision-forgiveness policies for a first accident.

In Canada, auto insurance premiums are on the rise — though there was a slight decline during the COVID-19 pandemic, when many people primarily worked from home. Countrywide, premiums jumped by 36 per cent between 2014 and 2024, according to data published in an April 2025 Statistics Canada report.

What to do after an accident depends on where you live, with the legislation around reporting varying slightly by province. Some places, like Ontario, require drivers to report within seven days, while in Alberta, the timeline is a bit more nebulous: "as soon as practicable."

The consequences of not reporting within those timelines can be significant, said Erik Knutsen, a lawyer specializing in insurance law and a professor at Queen’s University in Kingston, Ont.

Keeping quiet amounts to material misrepresentation and a violation of your contract with the insurer, he said. And when your policy is up for renewal, the stakes are higher: At that point, not disclosing a complete accident history is tantamount to fraud, Knutsen said.

"That's knowingly telling a mistruth that the insurance company is going to rely on in [deciding] how much money they're charging you."

It's unlikely anyone would be criminally charged for either breach, Knutsen said, but it does void the insurance policy and leave a driver open to liability.

For example, people choosing to pay out of pocket for a fender-bender could be hit by a personal injury lawsuit months later, he said, and the insurance company would be under no obligation to cover the costs if it were reported after the fact.

"And then you're on the hook for a potentially multimillion-dollar lawsuit, which could financially wipe you out."

Chris Brandon may not have gone through his insurance company for his last three claims, all connected to hitting a deer. (He lives in rural Sherbrooke, Que., he says by way of explanation.) But he has reported them to make sure he stays within the rules.

To keep his premiums low, he's limited the extent of his coverage, choosing collision insurance — to cover damage to another person and their vehicle or property from a crash — while ditching comprehensive insurance, which would cover theft or other potential risks to his own vehicle.

Brandon is handy and said he can repair the damage himself; it also helps that he drives a beater, estimating his Hyundai Elantra cost about $1,000.

"I would have to do, like, catastrophic damage to the engine" before filing a claim, he said. "I can always tell the tow truck driver, just tow it back to my house and I'll deal with it."

Newcomers face hefty car insurance bill in Canada

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