Regardless of your driving experience, there is always a risk of an accident associated with your car, and you must take precautions to stay safe in any such unforeseen event. While hits and accidents are sometimes unavoidable, you can keep your vehicle and yourself covered financially by taking a car insurance policy and renewing it on time.
You can always file a claim to get compensated for the damage occurring in an accident. However, claiming for an accident has some impact on the future insurance premium you pay to the insurance company.
In this post, let us discuss how raising a claim for an accident affects your car insurance premium.
Impact of Accident Claims on Third-Party Car Insurance Premiums
Filing a claim for an accident does not impact the third-party car insurance premium. The reason is that the premium for a third-party insurance policy is decided by the Insurance Regulatory and Development Authority of India or the IRDAI, and the amount remains uniform across insurance providers throughout the country.
Insurers are not allowed to make any changes to the third-party premium based on any factor, including accident claims. The accident claim is something not covered under third-party insurance but is available with a standalone own damage or comprehensive car insurance policy.
Given the standarised, prescribed rates in the third-party insurance segment, there is very little in the way of further scrutiny required by buyers. It is, however, recommended to go through the terms of the policy in detail to better understand the systems and processes of each insurer, apart from those already set by the IRDAI.
Impact of an Accident Claim on Comprehensive or Standalone Own Damage Insurance Premiums
The claim for an accident is made as a part of a comprehensive insurance policy or own-damage cover for your car. Accidents can impact the premium amount for this type of policy; if you make claims, the renewal premium can increase. The reason is that insurers offer you financial cover in exchange for a premium which is why the premium amount is based on the risk calculation.
If you often get involved in accidents and make claims, the insurance company might perceive you as a risky driver and raise your insurance premium upon renewal. If you have made many claims in the past, your insured sum may get impacted, or the number of car insurance add-on covers offered to you might be limited. You might be denied a comprehensive insurance renewal if the risk increases greatly.
For this policy, buyers should make it a point to go through the policy terms in their entirety to better understand the implications of making claims, reckless driving, and more. Each insurer has a different approach in this regard and their own risk management systems, which are reflected in the terms and premiums based on certain risk factors.
Reasons for an Increase in the Insurance Premiums After Accidents
Here are the two most common reasons why car insurance premiums may increase after repeated accidental claims.
Premium Loading
Those who raise car insurance accident claims regularly are subject to something called premium loading. It refers to the additional premium amount charged if a policyholder often files a claim with the insurance company. This is charged because such a policyholder is considered risky for the insurer due to his/her repeated claims.
The percentage of increase depends on various factors, including the type of claim, the insured declared value of the vehicle, and the amount of claim settlement you receive. Premium loading generally ranges between 10 and 15% of the previous premium amount.
Car insurance companies use such policies to encourage responsible driving, along with rebalancing their risk metrics. While premium loading remains common among most insurance service providers, certain add-ons can help minimise the impact of the same, along with those that protect the no-claim bonus (NCB) even when there has been a claim.
Loss of the No-claim Bonus
If you are raising an accident claim under a comprehensive motor insurance policy, you lose your accumulated NCB. It is a discount you get on the renewal premium for not filing any accident claim in the previous policy term. You get NCB every claim-free year and can get up to a 50% discount on your premium if you don’t make any claims for five years in a row.
Making a single accident claim results in losing the accumulated NCB regardless of your claim amount. As a result, you lose the discounted premium upon renewal and end up paying more while renewing your car’s insurance policy. If you haven’t raised an accident claim during the year, the NCB you accumulate keeps your renewal premium low.
Conclusion
Being involved in an accident and raising repeated claims can increase your insurance renewal price through premium loading and the loss of the NCB.
However, you can avoid paying higher premiums by getting the damage repaired on your own or adding an NCB protection add-on cover to your insurance policy. You can always try and avoid accidents by driving carefully to keep your motor insurance premium low.
Ultimately, insurance costs are determined by risk factors, and to continue getting low premiums and good coverage, the onus is on the drivers to ensure they remain compliant with rules and stay clear of reckless driving as much as possible
