Categorized | Car Insurance

downside of raising car insurance claim frequently

One of the purposes of buying car insurance is to transfer the monetary liability arising due to any accident, mishap or natural calamity to the insurance provider. The Insurer will bear the cost of any repairs to your car in case of physical damage during the accident.

Most people believe that once they buy motor car insurance it ensures that their liability arising due to physical damage to the car during an Accident will be limited to the Premium paid. But this is not entirely true. Before you decide to file a Claim for damage to your car, you should know about three things:

1) No Claim Bonus
2) Loading
3) Deductible

No Claim Bonus

All motor car insurance in spirit is designed to reward the safe drivers and punish the more negligent/offending ones. There are two components of a Comprehensive insurance cover –

1) Third party liability and 2) Own damage cover

The insurance premium for third party liability remains more or less the same for all customers, but the premium for own damage cover would vary depending on the claims that you have filed in the past years. For customers who have not claimed for own damage during the past 12 months of buying a car insurance Policy are eligible to get a “No Claim Bonus”. The amount of no claim Bonus would be deducted from the renewal premium, you would be expected to pay otherwise. 
This No claim bonus (NCB) amount is a decent amount and you would be more than happy for lodging a car insurance claim for a minor repair. The NCB in the first year is about 20 per cent of the renewal premium. If you continue with your no claim record for three consecutive years, the NCB is as high as 50 percent of your premium. It is also important to know that the no claim bonus applies to a particular Policyholder and not to a particular vehicle. This implies that if you are eligible for NCB on your current policy and if you sell the vehicle Insured under the policy, you can still retain the NCB and use it on another policy for another vehicle within 3 years.

Loading Premium

An additional premium is charged at the time of renewal, if the insurance company believes that the claims experience during the policy Term has been adverse. Generally, if the insurance company feels that there is higher Risk of accident with a policyholder based on the previous accident claim experience, they charge a Loading premium.

Deductible

While filing for a claim, be aware that the entire expense spent on repairs is not reimbursed by the insurance company. Most of the insurance policies have a Deductible component. Customers are required to pay an excess which is the minimum amount that you will bear in case of a claim. This amount is deducted from the claim amount. Policies carry a compulsory excess of Rs. 500/- or 1000/- and this depends on the cubic capacity of the vehicle.
Hence, if the damage is small, it may not be wise to make a car insurance claim because you will not only have to pay for Depreciation and excess, reducing the claim amount to an even smaller figure, but you will also lose your No Claim Bonus at the time of renewal. Before you buy a car insurance policy, study its policy terms carefully. These days, you can compare motor car insurance online and buy a policy that best meets your requirement.