You may be a meticulous driver, but that does not ensure that your car is safe and secure from accidents. Unfavourable weather conditions, improper roads and poor third-party driving can all impact your driving and lead to an accident on the road. To keep yourself and your vehicle safe from such situations, it is important to buy car insurance. It is available at most insurers at different premiums and with a wide range of additional benefits.
Car insurance premiums and car accidents
Your insurance provider offers coverage in exchange for a premium amount which covers your car against unanticipated mishaps and risks. It is important to note that a car accident can impact the premium amount. A car insurance premium is decided by calculating the risk factor and hence, for a profile that ranks higher on risk factor, the car insurance premium will be raised higher. Getting involved in a car accident and filing a claim for the same impacts your insurance premium for the next year. Additionally, filing for several claims in a single year can also have an impact on the sum assured as well as riders.
How do accidents affect car insurance premiums?
Accidents can have an impact on the premium amount if you have filed a claim for the same. When you are raising a claim for accidental repair, you are considered a risky profile. In the event of repeated claims, the sum assured can also be reduced if the premium remains the same. Many insurers also limit the number of riders you can avail. Raising a claim has multiple impacts on car insurance premiums.
However, deciding to pay for the repairs from your pocket does not impact the insurance premium amount. But, in case an inspection is conducted at the time of renewal, the premium and coverage may vary depending on the vehicle’s condition.
Impact of raising accident claims on third party car insurance
In the case of third party car insurance, the premium amount is not impacted even if you file a claim. Since third-party insurance is mandatory in the eyes of law and remains the same across all insurance providers, a motor insurance company cannot change the premium amount based on an accident.
Why is the car insurance premium increased after an accident claim?
The car insurance premium increases if a claim is raised for an accident, due to two primary reasons:
- Premium loading: As explained earlier, there is a risk analysis of your profile before your premium is decided. An individual with repeated claims is deemed as a high-risk profile and treated as premium loading. This means the company will charge an additional amount from people who regularly file an insurance claim. These customers are considered to be a greater liability and hence, the company requires you to pay an additional amount. The amount of premium loading is decided based on the type of claims raised in the past, the condition of the vehicle, the amount of claim settlement and the Insured Declared Value (IDV). The general range of premium loading varies between 10-15% of the previous premium amount.
- Loss of no-claim bonus: Every insurance holder is awarded a No-Claim Bonus (NCB) for not raising a claim for the entire year. This bonus is given in terms of a discount on the premium at the time of policy renewal of a comprehensive car insurance policy. This discount can go as high as 50% of the premium amount if accumulated over the years. This bonus, however, is lost if you file a car accident claim and you hence, have to pay a higher amount of premium.
How to reduce the premium amount in case of an accident?
The increase in car insurance premium amount can be avoided despite a car accident. Some of the ways are-
- Avoid filing a claim: In case there is minor damage to the car, one can avoid filing a claim and get the car repaired from your pocket. This will help in avoiding premium loading and also keep the no-claim bonus intact.
- Protect the no-claim bonus: By purchasing a no-claim bonus to protect the rider with your car insurance policy, you can protect the with a claim bonus even if you file an insurance claim. Depending on the policy terms, you can raise one or two claims during the policy tenure and yet, keep the no-claim bonus intact. However, you must remember to purchase the add-on at the time of buying/renewing the insurance policy.
- Install anti-theft devices: You can save on premium by installing certified anti-theft devices. Such gadgets ensure your car has a lesser chance of theft and hence, lower the premium amount to some extent.
- Choose voluntary deductibles: Increasing voluntary deductibles at the time of car insurance policy renewal means you are sharing the financial burden in case of car damage and filing a claim. This will help in lowering the premium amount. However, it is important to be smart when choosing deductibles as bearing a lot of financial burdens yourself will defy the whole purpose of getting car insurance.
- Digital insurance policy: You can get smarter and purchase a car insurance policy online that reduces the cost of middlemen and can be availed at better premiums. Additionally, buying car insurance online also allows you to compare different policies and inclusions at the same time, ensuring you always get the best coverage and less car insurance premium.
Getting involved in a car accident and raising a claim can increase your car insurance premium amount to some extent. However, it is easy to reduce the premium by choosing the right coverage and taking additional steps. Make sure you cross check your potential out of pocket expenses before you raise a claim. You may save significant amount by making a small trade off.
Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.