Does Car Insurance Premium Increase After Claiming for an Accident?

Nobody can predict what is going to happen next in their lives. That’s why you cannot be warned before meeting with a car accident. Car accidents are spontaneous and can happen with anyone at any time. Besides, car accidents don’t always happen due to your own fault. Rather, it also depends on other people on the road. You may be a great driver but yet you can’t escape from an accident if someone else is driving rash or loses control of his/ her car. The only thing in your hand is to stay prepared for any accidental damage to your car by getting it covered under the best car insurance in India.

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Do Car Insurance Cover Accidents?

Fortunately, car insurance does cover accidental damages. If your car meets with an accident due to your fault, the resultant loss or damages caused to your car or third parties will be covered by your motor insurance provider. However, if another car collides with your four wheeler with no fault of yours, that person will be liable to pay for the damages of your car.

The scope of coverage is dependent on the type of car insurance cover you buy. As a car owner, you can choose to buy the mandatory third party car insurance or the all-inclusive comprehensive car insurance policy. Third party car insurance takes care of all your legal liabilities in case you are responsible for damaging someone’s property or injuring somebody with your car.

On the other hand, comprehensive car insurance provides total protection by covering your third party legal liabilities along with accidental damages sustained by your car. Moreover, a comprehensive car insurance policy also covers loss or damages to your car due to manmade disasters, natural disasters, fire as well as theft.

Does Accidents Impact Car Insurance Premium?

Accidents can impact your car insurance premium if you make a claim. Motor insurance companies provide financial protection to car owners against various risks in exchange for a premium. The premium is higher if the risk involved is more. If you make an accident claim, you come across as a risky customer to your motor insurer and hence, your car insurance premium gets higher. Thus, your insurer will charge you a higher car insurance renewal premium if you have an accident claim history.

In case you have a history of repeated claims, it can also impact your car insurance cover. Some motor insurance companies may reduce the level of your policy coverage and offer you a smaller cover. Some of them may offer only a handful of add-on covers as part of your policy instead of all relevant add-ons. Moreover, some insurers may offer only third party insurance and not comprehensive car insurance to you.

But if you decide to not file a car insurance claim after an accident and get the repairs done on your own, then there will be no impact on your renewal premium. This is possible only if your car is not required to undergo an inspection during renewals. If your four wheeler is inspected before policy renewal, your insurer might discover the damage or repair work and increase your car insurance renewal premium.

Impact of Accident Claims on Third Party Car Insurance Premium

An accident claim does not affect third party car insurance premium. This is because the third party insurance premium is decided by the IRDAI or Insurance Regulatory and Development Authority of India. They remain uniform across all motor insurance providers in India. The insurers are not permitted to increase or decrease the third party insurance premium of even the best car insurance in India.

Moreover, an accident claim is a part of the own damages of your car, which is only available under comprehensive car insurance. If you only have a third party car insurance policy, you will anyway not be able to claim any loss or damages caused to your car in an accident.

Why Does Car Insurance Premium Increase After an Accident Claim?

Here are two reasons why car insurance premium increase after you make an accident claim. Take a look:

• Premium Loading for Regular Claimers

  In case you raise car insurance claims regularly, you will be subject to premium loading. In insurance terminology, loading refers to the additional premium charged to a policyholder if he/ she often files a claim with the insurer. This happens because a person with a history of repeated claims is considered as a risky customer and a greater liability for the insurer. Moreover, greater risks attract higher premiums. So if you raise accidental claims regularly, your motor insurer will charge you a higher premium due to loading.

  The loading percentage depends on several factors such as the Insured Declared Value (IDV), type of claim, the condition of the car and the claim settlement amount paid. Nonetheless, premium loading usually ranges between 10% to 15% of the previous policy premium.

• Loss of No Claim Bonus

  If you raise an accident claim under your comprehensive car insurance policy, you will lose your accumulated No Claim Bonus. A No Claim Bonus is a discount on renewal premium offered by car insurance companies to their policyholders in case they don’t file any claims in their previous policy year. The NCB discount can be accumulated every claim-free year and help you earn a 50% discount on your renewal premium if no claims are made for five consecutive years.

  If you make even a single accident claim, you will lose your accumulated NCB no matter how small the claim amount may be. As a result, you will also lose the opportunity to reduce your premium and end up paying a higher premium while renewing your car insurance policy.

How to Keep Your Insurance Premium Low Despite Car Damage?

There are a few ways to keep your insurance premium low even if your car has been damaged in an accident. Take a look at the following tips to keep your car insurance premium low:

• Don’t Raise a Claim

  If your car has suffered minor damages during the accident, then try not to raise a claim with your insurer. By not raising a claim, you will be able to protect your No Claim Bonus and also escape premium loading at the time of policy renewal. This way, you will be able to keep your car renewal premiums low despite car damage.

  PRO-TIP: Make sure to skip making a claim and get the damages repaired on your own only if you can afford to pay for the repair.

• Buy No Claim Bonus Protection Add-On

  Buying No Claim Bonus Protection add-on cover is a great way to keep your premium low even after filing a car insurance claim. NCB Protection add-on cover keeps your No Claim Bonus intact even when you make a claim under your car insurance policy. Thus, you will be able to use your NCB discount to reduce your premium during policy renewal.

  PRO-TIP: No Claim Bonus Protection add-on is available only under comprehensive car insurance and can be purchased by paying a slightly extra premium during the policy purchase.

• Increase Your Voluntary Deductible

  Another way to keep your renewal premium low is to increase your voluntary deductible. By opting for a deductible, you agree to share the financial liability of your insurer by paying a part of the claim amount during claim settlement. As a result, your insurer will be liable to pay you a lower amount in case of a claim and, in turn, charge a lower premium when you buy the policy.

  PRO-TIP: Don’t opt for a voluntary deductible that you cannot afford as you will be required to pay this amount when you raise a claim with your insurer.

• Install Anti-Theft Devices

  If you want to reduce your car insurance premium, you can install anti-theft devices in your four wheeler. By installing anti-theft devices, you make your car safer and lower the risk involved. Thus, the liability of your motor insurance company reduces and they will offer a lower car insurance premium to you.

  PRO-TIP: Make sure the anti-theft device that you install in your car is certified by ARAI or Automobile Research Association of India.

• Buy Car Insurance Online 

  If you want to pay lower insurance premiums, you can choose to buy a car insurance policy online. Several motor insurance companies charge a lower premium if the customer buys insurance online. This happens because the operating cost of an insurance company reduces online as they don’t have to pay to agents or for stationery, etc.

  PRO-TIP: Remember to compare various car insurance plans online at broker websites before buying the best car insurance in India.

In a Nutshell

Life doesn’t give you warnings before a car accident. The least you can do is stay prepared for any eventualities that may damage or destroy your car. If, unfortunately, your car meets with an accident and you raise an insurance claim, the policy premium will end up increasing at the time of car insurance renewal. However, try to avoid raising a claim if you can afford to get the damages repaired on your own.