Imagine that you find yourself in an embarrassing situation wherein you have caused a minor accident, damaging your car. Although you have plenty of motor insurance coverage, you are still inclined towards paying for the damages yourself. The thought of future hike in insurance premium prevents you from reporting the mishap to the insurance company. Is this the right approach?
Not reporting a minor accident to your insurer definitely makes sense if your vehicle was the only one involved in the mishap. Say, for instance, you damaged the rear of your car while backing into a pole. However, if the accident involved a third-party who suffered injuries, death, or property damage, the incident would not be classified as “minor” in the first place. This is when you will be required to report the case to the insurance company. In a nutshell, small dents/scratches on your car’s surface does not require a car insurance claim. In fact, it is best to refrain from raising a claim in such a scenario, as you may otherwise lose a lot of money.
Let us take a look at this in detail.
Third-Party Liability Insurance Claims:
Suppose your vehicle was parked in the neighbourhood and a neighbour’s vehicle rammed into it, causing an ugly dent. Irrespective of the nature of the damage, you can claim insurance under the third-party liability insurance of your neighbour. This is a situation wherein it is evident that you are not the at-fault driver. By claiming under the third-party liability insurance, you also refrain from raising a claim under your own policy. Your neighbour’s insurance provider is liable to bear the cost of damage repair in this third-party liability claim.
It is understood that raising claims under third-party liability insurance is cumbersome and tedious. However, in situations such as that elucidated above, it is best to opt for a third-party liability claim. You should note that an FIR has to be filed at the nearest police station following such an incident. This will strengthen your stand at the time of the third-party liability claim approval.
Protecting Your NCB:
No Claim Bonus (NCB) is a benefit that is offered to a car owner who does not raise any claim in a policy year. This benefit translates into a discount on renewal premium for the car insurance. If a car owner refrains from raising any claim for 5 consecutive years, he/she can benefit from a renewal premium discount of up to 50%! However, if the car owner raises a claim under the policy following that, the NCB earned will be reset to the previous value.
So at the time of raising a claim, it makes sense to understand whether it is really worth all the effort. You should assess the losses you are liable to suffer by raising the claim. This includes the loss of the accrued NCB and the subsequent increase in renewal premium. Also, consider the scenario wherein you pay for the losses yourself. Weigh out your losses in both cases and see which one costs you less in the long run. This way, you will be able to decide whether you should raise a claim or pay for the damages yourself.
Another factor that you should give thought to is the deductibles or excesses. At the time of a car insurance claim, you will be required to compulsorily pay a specific amount that depends on the engine capacity of the vehicle. This is referred to as the compulsory deductible. There is also another excess, i.e., the voluntary deductible, that you opt for at the time of policy inception. You will be expected to pay the voluntary deductible amount at the time of a claim. Only after you pay the deductible amount will the insurer pay you the remaining claim amount.
So, before raising a claim under car insurance, do the following:
- Add the excesses you will be paying with the NCB you stand to lose. This corresponds to your loss from the accident.
- Check whether this loss is greater than the actual claim amount. If it is, then it makes sense to pay for the damages yourself. Otherwise, you can proceed to raise the claim.
All in all, follow this thumb rule when raising car insurance claims - only make claims for large losses. Otherwise it may not really work out in your favour, as explained above.
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