- Date : 07/02/2021
- Read: 3 mins
Sometimes, putting in a claim for car insurance will not be a good idea, especially for small amounts. We tell you why.
Besides being mandatory by law, car insurance is a true saviour when it comes to finances. With car parts getting more sophisticated and the expertise required to repair them getting higher and higher, motor insurance is a godsend. However, making a claim for small repairs will do you more harm than good in the long run.
Here are some reasons why claiming car insurance for small amounts isn’t a good idea:
1. You will lose the NCB: The NCB (No-claim bonus) is awarded to people who don’t make a claim during a full year and is calculated as a discount on the following year’s premium. The NCB can range from 5 per cent upward to well over 25 per cent. This is an increasing discount over each consecutive year that passes without a claim. If you’re considering making a claim, you’ll have to take the projected NCB into account because once you make a claim, you start with zero NCB for the following year, then 5 per cent for the year after that, and so on. The cumulative payments you’ll end up making for the loss of the NCB might turn out to be more than the claim amount.
2. The deductibles should make you rethink: A ‘deductible’ is a component that the car owner needs to pay towards the car’s repairs, irrespective of the amount of the claim. There are two types of deductibles. A compulsory deductible is an amount that the owner needs to compulsorily bear for every claim made. For example, if the compulsory deductible amount is Rs 2000, the claimant needs to contribute Rs 2000 towards the repair, irrespective of the eventual repair cost. The insurance company’s contribution will be the repair bill minus the compulsory deductible. The other kind is voluntary deductible. This is a component that the owner pledges to contribute voluntarily over and above the compulsory deductible, and functions in the same way. Since deductibles ensure that the owner will not make trivial claims, it usually results in a lower premium.
3. It affects the resale value of your car: A smart buyer will take a look at the insurance policy and realise that the NCB isn’t at the level it should be if you hadn’t made any claims. This usually means an insurance claim, which in turn means that the vehicle was involved in an accident. Consequently, you will get offers that are lower than you would otherwise get.
4. It can increase your premium amount: Insurance companies are using more sophisticated methods to calculate insurance premiums, and one of the parameters is the history of claims an individual has made. The more the number of claims, the higher the premium will be for that individual. If you make too many claims, the insurance company might even deem you uninsurable and refuse to renew your policy.
It makes sense to refrain from filing a claim for small repairs because, over time, it will surely end up costing you more money. If you’re not sure whether the amount you intend to claim is worth it or not, sit down and crunch some figures, or get a friend who is good with numbers to help you out. Or you can simply ask your insurance service provider or advisor to clear things up for you. Here are 6 Motor Insurance Terms You Must Know Before You Claim