Guess the damage...

[Badger]

Or you run into someone and they sue for 50k medical damages.

The good news is that insurance policies also come with a team of lawyers that will help defend you against this kind of suit, the bad news is that your policy doesn't necessarily protect you against still having to pay, even after the insurance company has settled the claim.  Make sure you read your policy, and make sure it contains a subrogation waiver.  That is, if you run into someone and it is determined to be your fault, your insurance company will pay the claim and then may sue you to recover the loss.

Until your 300k house burns down. Or you need a 100k organ transplant. Or you go on disability. Or you run into someone and they sue for 50k medical damages.

You've pointed out the reason people need insurance:  to protect against catastrophic loss.  Filing nickel-and-dime claims is more likely to get you higher premiums (sometimes totalling more than the claim itself), surcharges, or becoming uninsurable.  This happens in homeowners insurance all the time...people make a relatively small claim, the insurance company pays, and then they get a notice of non-renewal when their policy term expires.

The one bit of advice I can give is to know your insurance!  Read your policy and know what it covers and what it doesn't.

[MKIV]

Slightly different scenario..

I got screwed with rates for a hit and run. Police wouldn't take a report because I didn't notice the damage until after I returned home from class. Go figure, IT WAS RAINING and I had no reason to walk to the passenger side of the car. Insurance covered it, but my rates went up slightly.

FWIW, this was with liability coverage only. I pulled the 'Maryland requires the uninsured motorist coverage that I am paying and I want to be covered under it.'

[fettcols]

Insurance is an evil we all must deal with. Being an agent I take a good bit of crap because nobody likes their insurance company. I've seen plenty of bad situations from customers involved with claims but when it gets really bad the insurance company is there for you. When you look at a policy booklet there's an "insuring agreement" near the front. It says what the company will do for you and what they expect in return. There's some interesting details about lawsuits and stuff in there, it's best to read it because sometimes it actually happens.

Before I was an agent I actually fell asleep reading one of those booklets. Now I find it interesting when I get my hands on one from another company or when my company enters a new state.  

Nickle and dime claims will change your rates but when it comes to major claims it's something you shouldn't have to do yourself. In most states auto insurance companies only look at the last three years of claims and tickets. After three years you're golden...