How can you protect yourself against future claims when paying out of pocket for damages to someone else's car?
If you are responsible for damages to someone else's car and want to pay out of your own pocket rather than going through your insurer, make sure the other party signs a settlement and release form that, among other things, indicates that acceptance of your check is payment in full of all claims, known or later discovered. With that signed document, the owner gives up rights to sue you for more money if later additional damages related to the accident are discovered.
Before handing over your check to the owner of the other car, you need to get a signed settlement and/or release and liability waiver form that is legally binding in your state. The reason you have to do this that unless the other side contractually agrees in advance that the money you are paying them fully satisfies all claims they may have against you, whether now known or later discovered, they can take your money and then still sue you for more.
Make sure the settlement or release form includes, among other things, (1) a brief statement of the details of the accident (enough to identify it, such as the location, date, the parties involved, etc.); (2) a description of the property damage to the other driver’s vehicle and any bodily injury(ies); (3) a statement that the money you are paying is full satisfaction of any and all claims (including the specifically identified one[s]), no matter when they are discovered; and (4) the other side’s waiver of their right to sue you, as well as a release of you from any further liability. Once the other car’s owner signs the form, he/she gives up their right to later file a lawsuit against you, such as by claiming that there are still more damages to his/her car from the accident (or later discovered bodily injuries). Sample release forms can be found on the internet, using search terms, such as “sample of auto release liability forms” or “auto accident waiver and release of liability forms.”
But does it make sense for you to make a deal on the side (rather than running the claim through your insurer) and offer to pay cash? You may want to go this route if the damages are minor and not too expensive to fix, there were no physical injuries, and you have the financial resources to pay. By doing this, there is no third-party involvement, no lengthy investigation by insurers, and writing a check is cheaper than looking at your insurance premiums go up.
On the other hand, save yourself time and effort If there are injuries in the accident—even if they seem minor. It would be smarter to let your insurer handle the claim. Too, if you cannot financially afford the repair costs, let your insurance company take care of everything.
Finally, if you find yourself in a situation where the other party balks at giving you a release in exchange for your money–which means that you have no protection for ongoing damage claims—it is best to just go through insurance. To not do so, puts you at incredible risk. Never give anyone your hard-earned money without getting something (in this case, protection from a lawsuit) in exchange for it.