If you’ve suffered injuries in a car accident in Texas or New Mexico, and the at-fault driver wants to pay out of pocket rather than going through insurance, you might think that sounds easier.
No dealing with adjusters, no insurance companies getting involved, potentially less paperwork and fewer delays.
But offering cash “out of pocket” comes with serious risks.
Before you accept, you need to know what you’re getting into and what choices you have.
Here’s what “out of pocket” means, the legal and practical risks, what to consider, and when an experienced New Mexico or Texas auto accident lawyer can help protect you.
For a free, no-obligation consultation, please call (575) 222-1000 or reach us online today.
What Does “Paying Out of Pocket” Mean?
“Paying out of pocket” means the at‑fault driver (or someone acting for them) offers to pay you directly for your damages (e.g., medical bills, car repairs, etc.), instead of having their insurance company handle the claim. It may involve a car accident cash payment agreement, a handshake, or an informal promise.
Is It Illegal to Accept an Out‑of‑Pocket Payment for a Car Accident?
No, it’s not automatically illegal. There is no law that says you must use insurance in every accident. However, laws about minimum insurance, reporting crashes, and liability still apply. If you choose to work privately with the other driver, it can lead to problems.
Should you accept an out-of-pocket payment and later realize the damage or injury is more severe than initially thought, or if medical treatment continues, you may have no recourse to force additional payment beyond what you and the other driver agreed to. So while the idea of cash payment isn’t per se illegal, it’s almost always risky without careful documentation and ensuring you’re fully protected.
Key Risks of Accepting Out‑of‑Pocket Payment
Here are some of the main dangers:
- Undervalued damages. If you think your injury or damage is minor but later worsens (e.g., medical complications, additional treatment, long‑term care, lost income), the cash amount may not cover your full need.
- No legal backing or enforceability. Informal agreements or verbal promises are hard to enforce. You might not have legal recourse if the other person changes their mind.
- No insurance protection. Insurance protects you against hidden costs, delayed injuries, or unexpected medical complications. If you bypass insurance, you’re taking on more risk.
- Statute of limitations. If you don’t report the crash or don’t preserve your legal rights, through insurance or otherwise, you might miss deadlines for filing claims.
- Policy limits and underinsurance. The at‑fault driver’s insurance (if they have it) might only cover up to certain limits. If their insurance is insufficient, they might push to settle underinsured or try to avoid a complete liability assessment.
- Problems with financial / tax consequences. Some damages could be taxable or may complicate medical liens or health insurance reimbursements. Additionally, if you accept payment, you may be required to relinquish your right to sue later.
- Collection risk. Even if the at-fault driver agrees to pay, do they have the necessary funds? If no insurance is involved, they may not have the assets or reliable ability to make payments.
Rather than agree to accept payment at the scene of the accident, take the time to speak with a lawyer first to protect your rights.
What to Consider Before Accepting an Out‑of‑Pocket Payment
If you are considering it, do these things first:
- Get everything in writing. A written agreement that states exactly what is being paid, when, for what damages (e.g., medical bills, car repairs, lost wages), and what happens if you discover more damage later.
- Document the injuries and damages. Include medical records, repair estimates/photos, lost wages, and anything else that proves your damages. Make sure you know the full extent.
- Estimate full costs, including future expenses. Don’t just add up what’s happened so far. Consider future surgeries, therapy, long‑term consequences, and rehab.
- Make sure you report as required by law. Even if you’re doing a private agreement, many jurisdictions require reporting of accidents to law enforcement or insurance if you meet certain thresholds.
- Understand that you might give up rights. Formalizing a private payment may require signing documents where you waive further claims; be cautious.
Oftentimes, a person wants to pay privately to avoid any legal record of the accident. That means they will likely try to talk you out of reporting the accident as the law requires. Do not be tempted to forego your legal obligation.
Is It Better to Go Through Insurance or Accept Out‑of‑Pocket?
Going through insurance is always safer.
Some reasons include:
- If insurance is involved, there’s more accountability and documentation;.
- Insurance often provides you with more leverage in recovering full damages, including noneconomic ones such as pain and suffering and long-term disability; and
- Going through insurance helps preserve your legal rights, where you don’t risk waiving claims inadvertently.
That said, some people accept out‑of‑pocket when:
- There are no injuries, and property damage is very minor;
- The at-fault party has sufficient resources, is trustworthy, and you receive everything in writing; and
- You want to avoid raising insurance rates or want a faster resolution in exchange for accepting a less-than-full potential value.
However, even in these situations, a lawyer can help ensure the out-of-pocket agreement is fair and safe.
How a Lawyer Helps
Working with a personal injury attorney can be especially valuable in these scenarios because:
- They negotiate with insurance companies to try to get more, both monetary and non‑monetary damages;
- They understand Texas & New Mexico laws, such as liability minimums, comparative fault, and statutes of limitations, and how to use them to your advantage;
- If a settlement isn’t possible, they can take the case to trial; and
- They protect you from pitfalls like medical liens, health insurance subrogation, and waivers that take away your rights.
Having a trusted advocate in your corner means you won’t have to navigate confusing agreements or insurance traps alone. Instead, you’ll have the guidance and protection to focus on healing while your legal team safeguards your future.
Contact a Car Accident Lawyer Today
If an at-fault driver wants to pay out of pocket, think twice before accepting. The risks are real, and once you sign away your rights, there may be no turning back.
At Tawney, Acosta & Chaparro, P.C., we combine aggressive trial experience with personalized attention to ensure you don’t settle for less than you deserve. Whether reviewing a private agreement, negotiating with insurance, or taking your case to court, our team is here to protect your future, not just close your case.
Give us a call at (575) 222-1000 or send an online message today for a free consultation.
Daisy Chaparro
Daisy Chaparro was born and raised in El Paso, Texas. A graduate from El Dorado High School in 2008 and obtained a Bachelor of Arts in Political Science with a minor in Philosophy from St. Mary’s University in 2012. Daisy then obtained her Juris Doctorate (magna cum laude) from Texas Tech University School of Law in 2015.
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