Earlier this week MPI gave some tips for drivers who are dealing with potholes. In the Global News story that followed, Ashley Carter talked to a garage owner who said that some of his customers are choosing not to go through MPI for repairs to their cars, instead forking out as much as $5,000.
Paying $5,000 out of pocket sounded silly to me. The whole reason we buy insurance is to allay expenses like a giant repair bill. Assuming there are no other reasons to avoid MPI (ie. the driver was breaking the law), I wondered if people are overestimating the effects a claim would have on their insurance rates.
MPI says if you do nothing to avoid a pothole, you could be found at fault and assessed five demerits. Generally, that would raise your driver’s premium and insurance costs starting the following year. Maybe not as much as you think.
For someone with a 15 rating from MPI (the best rating possible), getting five demerits would cost you a total of $450 over the following five years (assuming a $1,700 base insurance rate). The five demerits would mean you pay $5 more a year for your premium, and increase the cost of insurance by a total of $425.
The largest increase any driver would pay over five years would be $1,900. That’s for someone starting with a -13 rating. Therefore, in most cases drivers with a repair bill over $1,900 plus their deductible should not pay out of pocket. Demerits might make you feel bad, but going through MPI will save you money.
Interestingly, there is no financial penalty for someone with the lowest possible rating, -20. According to MPI, a -20 driver getting five demerits will remain at -20, and then they will progress up the scale like any other -20 driver.
In a province with private insurance (or one that doesn’t lay out its prices the way MPI does), there may be a reason to avoid having insurance pay for your damages. But in Manitoba, paying $5,000 out of pocket — as the shop owner mentioned — is just bad math.