How Much Does Car Insurance Get Affected by Claims?


Since it is mandatory in India for every four-wheeler to have a motor car insurance policy, you will need 4-Wheeler Insurance as long as you own a car. Two types of car insurance policies are available – third-party liability and comprehensive insurance for cars. The premium of a third-party car insurance plan is fixed based on the car’s cubic capacity (cc). It is declared by the Insurance Regulatory and Development Authority of India (IRDAI). However, the insurance company determines the premium of comprehensive car insurance in India based on the risk assessment of the vehicle and the owner-driver.

The purpose of buying a car insurance policy is to receive coverage for damages in the event of an accident or mishap. This is done by filing a car insurance claim. However, did you know that every time you file a motor insurance claim, the premium of your policy for the next term can get impacted?

This article will look at how claims impact car insurance rates.

Types of Car Insurance Claims

There are two types of car insurance claims:

  1. Third-Party Claim – If the insured car causes an accident or collision and causes damage to a third-party person or property, then the third-party car insurance policy offers coverage. You can file a claim for such damages to a third party.
  2. Comprehensive Claim – A comprehensive car insurance policy offers coverage from damages to a third party. It also includes damage to the insured vehicle due to an accident, collision, natural disaster, theft, or man-made disaster.

Impact of Filing a Claim on Your Car Insurance Policy

When an insurer calculates the premium of a car insurance plan, it considers various aspects that allow it to assess the risk and the probability of a claim being filed. The insurer hopes that the policyholder does not file several claims as it would have to bear the costs out of its pocket. Hence, if the insurer finds that a policyholder is filing frequent claims, then the premium rate of the policy will be increased for the next policy term. Some insurers might also reduce the sum assured or restrict the coverage offered by certain add-ons. There can also be cases where the insurer rejects the complete claim.

Let’s look at how car insurance impacts all types of claims.

●       Impact of a claim on a third-party car insurance policy

The premium of a third-party car insurance policy is determined by the IRDAI. The premium for such policies is determined based on the car’s engine capacity. Insurance companies are not allowed to change these rates. Hence, even if you file multiple third-party claims, the premium of the policy will not change.

●       Impact of a claim on a comprehensive car insurance policy

In a comprehensive car insurance plan, the premium is determined by the insurer. Policyholders filing claims can expect the premium rates to be impacted due to these two reasons:

  • Premium Loading

As mentioned above, insurers assess your risk profile to determine the premium. If you have filed several claims during a policy term, you can experience premium loading on your policy. This means that the insurer might charge an extra premium as it assesses your profile as a high-risk one. While there are many factors affecting the premium of a car insurance plan, premium loading can add up to 10-15% of the premium paid earlier.

●       Loss of No Claim Bonus

Insurance companies offer a discount on the premium at renewal to policyholders who do not file a single claim during a policy term. This is a progressive discount that starts at around 20% and can go up to 50% of the premium amount with every claim-free policy term. However, if you file a claim, you risk losing the accumulated discount.

Summing Up

While accidents or mishaps cannot be completely avoided when you own and drive a car, you can ensure that you don’t file a claim for every minor repair work. It is important to remember that insurance companies will look at your driving record and claim history, among other factors, while trying to determine the premium of the policy. At the time of renewal, if you think the premium is too high, you can look at an online car insurance policy, compare providers and plans, and use an online car insurance calculator to find the most affordable policy for your needs. Good Luck!

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