Does Car Insurance Premium Increase After Claiming for an Accident?

Accidents are unpredictable, but their financial impact does not end with repair bills alone. They offer financial protection but might also come with the question of whether the car insurance premium increases after claiming for an accident or not. In this article, we will explore whether car insurance claims impact the renewal premiums and how to prevent the premium increase despite the damage.Read more

Do Accidental Claims Impact Car Insurance Premium?

Yes. Accidents can impact your car insurance premium if you make a claim. If you make an accidental claim, you come across as a risky customer to your car insurance company and hence, your car insurance premium may get higher. Motor insurance companies provide financial protection to car owners against various risks in exchange for a premium. 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 and result in lower coverage. Some insurers 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 not to 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 because it does not affect your accumulated No Claim Bonus (NCB), which is the major factor reducing your renewal premium.

How Does an Accidental Claim Affect Third-Party Car Insurance Premium?

An accidental claim does not affect third-party car insurance premiums. This is because the third-party premium rates are decided by the IRDAI (Insurance Regulatory and Development Authority of India) based on the vehicle's engine capacity. They remain uniform across all motor insurance providers 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 insurance policy, you will not be able to claim any loss or damage caused to your car in an accident.

Why Does Car Insurance Premium Increase After an Accident Claim?

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

1. 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 they often file a claim with the insurer. This happens because a person with a history of repeated claims is considered a risky customer and a greater liability for the insurer, and attracts 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.

2. 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 in car insurance is a discount on renewal premium offered by 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:

1. Don't Raise a Claim for Minor Damages

   If your car has suffered minor damages during an accident, then try not to raise a claim with your car insurance company if you can get it repaired by yourself. By not raising a claim, you will be able to protect your NCB 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.

2. Buy No Claim Bonus Protection Add-On

   Having an NCB Protector add-on cover is a great way to keep your premium low even after filing a car insurance claim. The add-on cover keeps your discounts 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.

3. 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 with 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.

4. Install ARAI-approved 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.

5. 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 increase 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.