Does Accidental Risk Impact Car Insurance Premium?
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 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 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 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 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 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.
Some commonly asked FAQs
1. Will car accidents affect the insurance rate of my Third-party Liability policy?
A third-party insurance policy will not be affected by accident claims made by the policyholder, as the premium rates are predetermined by the Insurance Regulatory and Development Authority of India and are uniform. Also, own damages can only be claimed if the insured has a comprehensive cover. Therefore, there arises no question of an accident claim affecting a third-party policy cover.
2. Can I choose to buy a No Claim Bonus Protect Add-on if I have filed a claim during the previous policy period?
The No Claim Bonus add-on can only be opted in for a future period and will protect the NCB accrued in the future. It has no bearing on the previous claims or actions of the policyholder.
3. Will one small claim result in Premium Loading?
Premium loading usually occurs when the insured makes large claims and does so at frequent intervals. Though a small claim might result in the loss of NCB, it will not result in premium loading.
4. Can I switch to a Third-party Liability policy if my insurance company is charging a higher premium for a Comprehensive policy? Or Can I change my car insurance company?
A comprehensive insurance policy is a wide-ranging, inclusive cover. It is a combination of both a third-party liability cover and an own damage cover and indemnifies the insured against theft, fire, damage caused to/by third parties, riot damage, natural disasters, and the like. It is not prudent to forego 360-degree coverage merely to reduce the premium payment. Instead, of switching the policy, one must look for smart ways to enjoy a lower premium of comprehensive policy.
5. How much does the premium go up after a minor accident?
The quantum of increase in the premium amount is dependent on factors such as the claim history of the insured, the nature of the claim raised, car’s IDV, etc. There is no predetermined value for this increase in premium. In fact, there might be no change in the premium amount if the accident is a negligible, inconsequential one.
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.