How Avoiding Small Claims Can Reduce Your Car Insurance Premium?
Having a third party car insurance is a mandatory requirement for individuals driving their vehicles in India under the Motor Vehicles Act 1988. The importance of having a third party car insurance cannot be overlooked as it offers a peace of mind when an accident happens. Having a third party car insurance helps in paying for third party damages of property or life and even covers legal expenses during an accident, hence it is important to have your car insurance policy renewed on expiry.
There are several methods in which you can get the premiums reduced on renewing the car insurance policy. And one of the ways to do so is by avoiding small claims.
Although applying for claims even for the smallest of damages may look attractive at first as it is an easy and cost-effective option, not doing it would have a huge impact on your premiums in the long run as your Non-Claim Benefits keep accumulating.
What are the Non Claim Benefits (NCB)?
Non-claim benefits offered by car insurance companies in India can be referenced as NCB or No Claim Bonus. This is offered by insurance companies as a means of incentivizing drivers to maintain a safe driving record. Generally, NCB rewards drivers with financial benefit in the form of lower premiums, discounts and some other exclusive benefits.
NCB can be earned by a policyholder if they do not file any claim during their entire policy tenure. A policy holder can earn up to a maximum of 50% discount on the premium of their car insurance if they do not make any claims. The accrual of the NCB is typically calculated on an annual basis, but many insurers have now begun offering NCB benefits after a period of 3 years.
| Discounts on premiums under Non-Claim Bonus benefits: | |
|---|---|
|
Years |
Discount % |
|
If claim is taken in last 1 year
|
0%
|
|
If claim is not taken for 1 year
|
20%
|
|
If claim is not taken for 2 years
|
25% |
|
If claim is not taken for 3 years
|
35% |
|
If claim is not taken for 4 years
|
45% |
|
If claim is not taken for 5 years or more
|
50% |
Why do Car Insurance Companies charge higher premiums to drivers making small claims regularly?
The premiums paid by individuals for the insurance is a source of income for the car insurance companies. The premiums that the car insurance companies charge enable them to continue to provide coverage for those that need it. As such, insurance companies need to ensure that the premiums they charge are sufficient to cover any potential payouts.
When individuals file small claims, the insurance companies see this as an increased risk that may result in significant payouts in the future and, as a result, adjust the premiums accordingly.
Every claim that is filed is registered in an individual’s car insurance policy and this can be used as an indicator by the insurance company of how likely you are to file future claims. A history of multiple small claims may not only result in an increase in your current insurance premium, but could potentially make it hard to find insurers willing to provide coverage in car insurance online in India.
Filing small claims may seem like a good idea at the time, however, it is important to remember that most car insurance companies in India can use this as evidence that you are more likely to file more expensive claims in the future. This means that, although a small claim today may seem convenient, it could end up costing you significantly more money in insurance premiums for years to come.
Conclusion:
Therefore, when looking to save money on car insurance premiums, it is important to ensure that you do not file any small claims in order to maintain a good driving record and limit the increase in insurance premiums. By avoiding small claims, not only will you keep your premiums low, but you will also ensure that you are seen as a good driver by the car insurance companies in India. This will make it much easier for you to find affordable coverage when your policy is due for renewal.
