Accidents and your car insurance premium – things to know
Accidents and your car insurance premium – things to know
Published on July 13, 2020. EST READ TIME: 5 minutes
No matter how perfect your car is and how good a driver you are, accidents cannot be completely avoided. After all, life is full of uncertainties. And this is where a car insurance policy can come in handy, protecting you against unforeseen expenses for repairs and even hospitalisation. And a comprehensive cover not only protects you in case of accidents but also natural calamities and fires. However, getting car insurance is a premium. So, this article will explore how accidents can affect premiums and what you can do to keep premiums low.
How does an accident impact premium?
In case you are making a regular claim after an accident, your car insurance premium will shoot up. If you have a history of filing claims, then your profile might get flagged as a risky profile. This implies higher risk associated with your car and a higher premium will be charged in turn. On the contrary, if you are not making claims, then your car insurance premium will not increase rapidly until your insurance provider carries out an inspection of your vehicle before providing the insurance.
Reasons for the increase in premium
1. Premium Loading
The additional amount of car insurance premium which you will be charged for making CLAIMS after accidents is known as premium loading. As stated earlier, this happens because you will be considered a risky prospect due to your repeated claims. Usually, the amount of premium loading is within the range of 10% to 15% of your previous premium. This percentage mainly depends upon factors such as the IDV of the car, the condition of your car, the category of the claim raised, and the claim settlement amount given.
2. No Claim Bonus
When you are filing claims in a particular year, you are bound to miss out on the No Claim Bonus. This is the discount offered on the car insurance premium at the time of insurance renewal. If you have not raised claims during the previous year, then the discount you obtain on your car insurance policy will keep your premium amount low.
Ways to reduce your car insurance premium
Avoid frequent claims - If your claims are of low value, you can take care of the repairs on your own and avoid making frequent claims. This will help you avoid premium loading and you can also enjoy your NCB.
1. Anti-theft security system -
You can install an anti-theft security system certified by the Automotive Research Association of India (ARAI) in your car. This will help protect your car against theft, reduce your likelihood of raising claims, and thus, keep your premium low.
2. No Claim Bonus -
You can purchase the No Claim Bonus add-on to enjoy the freedom of raising one or two claims during a year and keep your NCB active.
3. Voluntary deductible -
During the renewal of your car insurance policy, you can increase the voluntary deductible. With this, you will be sharing the burden in case of any damages caused to your car in an accident. This will reduce the amount that the insurance company will pay during settlement, and in turn, reduce the premium as well.
4. Online purchase of car insurance -
By purchasing your car insurance policy online, you will be able to explore more options on discounts associated with the insurance premium.
FAQ
1. How does an accident impact the premium of a third-party plan?
The third party insurance plan is a fixed coverage and its premium is also constant. The number of accidents that take place won't impact the premium if a third-party motor insurance plan. This is only applicable to the comprehensive plans.
2. Can a minor claim lead to premium loading?
In most cases, only a major accident will result in premium loading. Most insurance providers ignore minor accidents and claims but if there is a serious accident, followed by a large claim, then the premium loading does take place.
3. Is the no-claim bonus protection rider useful?
Yes, the no-claim bonus is very useful as it protects your accumulated NCB against claims. When you have this rider, your NCB stays intact even after you make a claim or two.
4. Is there a fixed increase in the insurance premium after an accident?
There is no fixed increase in the insurance premium of a car insurance plan after an accident. It depends on the insurance provider, the nature of the accident and the volume of the claim.
Conclusion
All in all, car accidents are unpredictable and the damages caused can burn a big hole in your pocket. While car insurance can protect you against financial loss as well as physical ramifications, you need to be careful about the terms and conditions of the policy, understand the factors that can increase your premium, and follow the tips discussed here to obtain maximum cover at a nominal premium.
Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.
RELATED ARTICLES
Does Your Car Insurance Policy Cover Hit and Run Cases?
How to identify a car's owner from the registration number?
The Importance and Benefits of a First Aid Kit in Your Car
Things to Keep in Mind If You Are Not Responsible for An Accident
Is There a Limit on The Number of Claims in A Car Insurance Policy in India?