Industry experts believe that it is essential that the insured files his/her claim after thorough calculation. Since each decision to file a claim against the existing car insurance policy will impact the premium rates, the quantum of the no claim bonus (NCB), and the savings of the insured, it's important to file your claim after careful thought.
Giving this article a quick glance might help you discern the circumstances under which the insurance claim must be filed.
When Should You File a Car Insurance Claim?
1. If you or the third-party driver is suffering from injuries
It is advisable to use the cover offered under the insurance policy as it will provide for any fiscal liability incurred and will also cover legal liability for the damage caused to the third party. Such damages may be in the form of bodily injury, death, and damage to third-party car/property. However, note that third-party car insurance will not pay for injuries caused to the insured and for the repair of damages to the insured’s car. On the other hand, if it is a package or a comprehensive policy that covers own damage (OD), then even the insured will be protected under the policy.
2. If the damage to the car is quite big
The car insurance cover is meant to act as financial armour against accidental damage that can render the vehicle unfit for use. Therefore, if the financial liability incurred is substantial, even after factoring in the deductibles, then it is best to opt for the insurance claim.
When Should You not File a Car Insurance Claim?
It is a good guideline to follow that claims must be avoided in case of little or inconsequential mishaps, i.e. –
1. If there are small dents or scratches
Filing a claim must be avoided since there would be a loss of the NCB, a discount offered by the insurer at the end of the claim-free year. Most NCBs offered start at the rate of 20% for the first claim-free year and steadily rise to 50% (maximum limit) for every subsequent claim-free year thereafter. Therefore, in order to benefit from this, you should avoid making claims for every small dent or scratch caused to the car and instead choose to pay it out of one’s pocket. Let's understand this with the help of an example-Rima's car met with an accident and there were slight damages that her car had. Her husband advised her not to raise a claim request as she will lose her accumulated NCBs of 3 years, i.e. 35%. But Rima didn't listen to him and filed a claim. However, though her claim request was accepted by the insurance company, she lost her NCBs which had a higher value than the repairing cost of the car. With her saved NCBs she could get a higher discount on her next policy premium, which would be more profitable for her rather than raising a claim request for minor car damage.
2. If you can settle it with the third-party privately
Though such a decision is not advisable in case of a major accident, if there are minor accidents with no physical injury caused to the third party, then a fair, reasonable settlement might be a prudent approach to resolving the issue.
3. If the repair cost of the damage is less than the NCB
This may be best understood with the help of an example. Say the car insurance company offers an NCB of 15% for the first claim-free year and increases it to 20% for the second claim-free year. It so happens that your car meets with an accident in the 2nd year of purchasing the insurance policy and you are in a dilemma as to whether you should file a claim.
With some calculations, the out-of-pocket expenditure incurred from this accident is estimated to be INR 10,000. However, the NCB that the company offers you at the end of your second claim-free year would be INR 20,000. The dilemma you face will automatically dissolve in the face of such simple calculations!
4. If the repair cost is close to the deductible amount in the policy
Deductibles are those amounts that the insurer will have to bear. In other words, they are an out-of-pocket expenditure. The very purpose of compulsory deductibles is to deter the policyholders from raising small claims and to nudge policyholders to develop a cautious driving habit. In case of a claim, the insurance company will only pay the amount after subtracting the deductibles and depreciation costs. It is rather futile, claiming small amounts which are close to or less than the deductibles specified in the policy as the net gain is next to nothing.
How does Making a Claim Affect the Rates of the Premiums?
Recurrent filing of insurance claims adversely impacts the claim history of the insured. This may result in an increase in the renewal premium rate. This can depend from policy to policy so do read the fine print to understand the route your insurer will take after repeated claims.
Summary
It is only natural that one wishes to exercise the benefits that the insurance policy has to offer when something untoward happens. But, rather than gathering all the requisite documents and contacting one’s insurance company in haste, it is important to weigh all the pros and cons of making such a claim in monetary terms and act accordingly!
