Motor Insurance: Ignore small claims for bigger benefits

Written on Monday, September 14, 2015
By Kumar Pushpraj

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Most often we find ourselves in dilemma while deciding to file a claim for our car or bike insurance. Accidents are worrisome but we have a sense of financial security due to the effective motor insurance, now suppose your car met with an accident and it was not a major one, should you be filling a claim? Well, insurance is based upon the concept of risk and simply put higher risk is bound to increase the premium. Adverse claim history is one of the factors that impact premium rates. In case of motor insurance, for instance, it directly impacts the no claim bonus, which becomes zero and thus will result in a higher premium amounts in the future.

Before you decide to file a claim, you should carefully evaluate the level of loss, applicable deductibles, any impact on the no claim bonus and future premiums if any and then only you should proceed. Most insurance policies state a sum called 'deductible' or 'excess' which is the part of any claim amount that you would have to compulsorily bear yourself. In case of a claim, only the amount after removing the 'deductible' is payable subject to other deductions such as depreciation etc. Thus, it is pointless to claim small amounts which are close to or less than the 'deductible' amount specified in your car insurance policy as you would gain very little or close to nothing.

Let's make it clear with the help of a situation 
Assume that your car insurance has a deductible of Rs 2000 and the no claim bonus works out to Rs 6000. Now, if you file a claim of, say Rs 4000, you will have to pay Rs 2000 yourself and also you will lose the no claim bonus of Rs 6000. It will make sense to file a claim only if the amount is well over Rs 8000, say Rs 13000 plus. This is because the outgo from your pocket added to the loss of no claim bonus would equal Rs 8000. Nevertheless, if the claim amount is say Rs 10,000, then it may be wiser to get the car repaired at your own cost and forgo the claim.

The negative impact of frequent claims
Filing one or two claims over several years is unlikely to make much difference, but if you become habitual of filing insurance claims frequently, it will adversely impact the claim history of the policy. Apart from shooting premium rates, insurance companies can even deny the renewal of your policy if there are sustained losses over years on the insured risk or there is no due diligence observed by the insured to avoid the repeated losses. Hence, a worthy rule to follow is to only file claims in the event of a major damage and avoid filing it in case of little mishaps, be it a minor dent on the bumper or the body of your car. 

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