When you find yourself in an unfortunate accident, it is when you are reminded about your insurance policy. Accidents are sudden and can have significant injuries and damages, both to you and your car. But your car insurance plan keeps you away from financial worries.
However, a claim towards your car insurance can take away the benefit that you have accrued in the past.
There are situations where your car is the only one involved in the accident. For example, when you’re parking and you hit the rear bumper. It surely is going to look bad with a cracked bumper, and that is when you decide to claim your comprehensive policy.
But not all damages require you to file a claim. When you file a claim, any bonus that you might have earned in the past is forgone like the No Claim Bonus (NCB).
So here lies the question, should minor damages be addressed by making a car insurance claim?
While there is no fixed rule as to when you can make a claim, it is at your discretion of which expenses to get reimbursed from your insurer. When you make a claim for car insurance, you eventually lose out on the opportunity to take advantage of the NCB that further reduces your premiums.
When to file a claim depends on four important factors – quantum of loss, deductibles for your policy, impact on NCB and the increase in future premiums.
Impact on NCB
No claim bonus (NCB) is a concession in your premiums offered by your insurer for every claim-free year at the time of renewal. The rates for NCB start at 20% and go up to 50% for each policy year without claims. So in the event you make a claim, this bonus amount goes back to zero at the time of car insurance renewal. For this reason, one should avoid making claims for nominal damages.
A deductible is that portion which the insured has to bear while making a claim. Percentage of the deductible varies among each motor policy. When you file a claim, you need to pay the deductible after considering other reductions for depreciation on your vehicle and the balance is paid by the insurance company. Therefore, it is of no use when you have a high deductible while claiming for minor damages. The benefit of future NCB is lost as well as requiring you to make an upfront payment for the damages or repairs.
Quantum of loss
If you find yourself confused about whether to make a claim, you must check whether the amount of repairs is affordable by you or not. In case it is something you can easily pay for, making a claim may not seem to be a fruitful exercise. Further, making claims for small expenses will compromise the accrued NCB which may take away the available concession at time of your car insurance renewal.
Increase in future premiums
The reasons mentioned above have a final impact on your future car insurance premium amount. The loss of NCB, deductible shall lead to an increase in the premium amount at the time of car insurance renewal. So it is better to evaluate whether incurring the repairs in present or losing on bonus benefits under your policy are a better option.
While you estimate its impact on future premiums, you can also make use of a car insurance premium calculator to understand how the claim will influence your premiums. To conclude, the impact of damage will help you decide whether to make a claim or not. But bottom line, any claim for minor damages should be avoided.