Accidents are spontaneous, unforeseen events that even the most careful, experienced driver can meet with. Oftentimes, it might not even be that person’s fault. A comprehensive insurance cover offers financial safety and some solace to the driver at such testing times. However, as a car insurance policyholder, one needs to be mindful of the fact that the insurance premium gets impacted with every accident claim that is filed. How does that work? Read on to find out.
How does an Accident Impact a Car Insurance Premium?
An accident can impact the car insurance policy premium only in circumstances where the insured makes a claim. If the insured gets the repairs done without filing a claim, then while renewing the insurance, there would be no impact on the premium, unless the insurer discovers, while inspecting, that some repair work has been done to the car in the interim.
You must be fully aware that the rate of premium is proportional to the risk involved. With the filing of the claim for an accident, the risk increases, inducing the insurer to increase the premium too.
If there is a repeated history of claims against your name, then the car insurance company in most cases will offer you a smaller cover, high premium, and reduce your level of coverage. Even the add-ons offered might be limited. In the worst-case scenario, the insurer might refuse to offer a comprehensive car insurance policy cover and instead provide you with only the mandatory third-party protection.
Reasons Why the Premium Increases After an Accident?
- Premium loading: Premium loading refers to the additional premium charged to the insured for frequent filing of claims. This additional premium is for the additional risk that the insurer has to take for a riskier, accident-prone customer. The loading percentage usually depends on factors such as the type of claim, Insured Declared Value of the car (IDV), the condition of the car, and the claim settlement amount paid. On average, the premium rate is between 10% to 15% of the previous policy premium.
- NCB: A No Claim Bonus, is the amount that the insured is entitled to receive for having made no claims against the policy in the stipulated period. The premium increases when the NCB is foregone due to an accident claim as this discount cannot be availed by the policyholder anymore.
How can You Ensure a Lower Premium Even After an Accident?
The insured can make use of the following measures to ensure that he or she continues to pay a lower premium even after filing an accident claim against the insurer –
- NCB Protect: By purchasing an NCB Protect, the insured can ensure that the benefit of NCB is not lost due to an accident claim that is made against the car. This add-on offers the policyholder an option of raising one or two claims during the term without having to lose the NCB.
- Avoid making claims for small damages: Small repairs can be handled by the policyholder as they will benefit the insured financially in the larger scheme of things. This will prevent loading as well as loss of NCB.
- Anti-theft devices: The insured can bring down the premium of the car even after an accident by investing in anti-theft and other safety devices like airbags, GPS tracking, advanced braking system, etc. The device must be certified by the Automotive Research Association of India to avail of the benefit of a lower premium.
- Voluntary deductibles: The insured can assure the car insurance company that he or she will share the financial burden of the insurer in case of future unforeseen accidents by increasing the voluntary deductible limit while renewing the policy. Though this might significantly lower the premium amounts, be wary as taking on a huge out-of-pocket expense might defy the very purpose for which you sought out the insurance in the first place.
- Digital insurers: Digital insurers are new-age car insurance companies that offer lower premiums to the insured without compromising on the coverage and benefits that the insured can derive out of the policy.
As a policyholder who has fulfilled all his/her obligations listed under the policy, it is natural for you to seek some consideration from the insurer at difficult times. Tread carefully while filing the claims and invest time and effort into making the decision. Weigh all decisions in monetary terms and time costs to better understand the pros and cons of the decision.