When Not To Claim Car Insurance

Scenario 1: Where repair cost is lower than No Claim Bonus (NCB)

Generally, if you have not claimed your car insurance in the previous year, you’ll get a discount of 20% on your next year’s premium. This discount is known as ‘no claim bonus’ or NCB. Every car insurance premium has two primary portions: a) own damage premium and b) third party premium.

NCB discounts are applicable on own damage premium and it comprises more than 80 per cent of total car insurance premium. Thus, the NCB discounts look sizeable even after neglecting the third party premium portion.  

Let’s try to understand this with the help of an illustration: Mr. Kumar owns a Maruti Swift, and he pays a total premium of Rs. 10, 000, of which own damage premium is approx. Rs. 8000. Now, as his car is in the second year of insurance cover, NCB shall be 20% of own damage, which comes out to be Rs. 1600. This amount has to be compared with the expected expenses on rectifying the damage through an estimate by an authorized garage.  

If the cost of repair exceeds Rs. 1600, Mr. Kumar should claim the insurance. If not, he shouldn’t. Paying for your car repairs keeps your premium costs down and helps you save money in the long run.

Scenario 2: When third party can pay your repair expenses

Suppose your car is in sixth year of insurance cover and you’re expecting huge NCB benefits, and then it met with an accident. The probable options are a) pay the cost of repair out of your pocket b) file an insurance claim c) file a third-party insurance claim. If the accident is other driver’s fault, then you can opt for the third option.

The process of claiming third-party insurance may be cumbersome though. The difficulty arises from the fact that the claim has to be made at the Motor Accident Claims Tribunal, as civil courts do not decide on motor insurance claims.

One has to file an FIR with the local police and obtain the charge sheet. If you can prove that you are not at fault for the accident and possess the records for payment towards repairs, chances are high that your third-party claim on the insurer will be approved. This way you will not lose your NCB benefits either.

The Bottom line

Insurance companies use your claim history to access how much you could cost them, and the more claims you make, the riskier they will assume they will be. Moreover, filing claims on regular basis will increase your premium costs as well. Therefore, it’s better to know when it’s the right time to call for a claim and when to not.