Suppose, you are driving your car in a traffic rush, and while overtaking, the primer of your car gets scratched and some minor damage takes place. You know you have got your car insured and the insurance company will cover the repairing costs. But should you raise a claim for that small amount? Or get the wear and tear fixed yourself and contribute to something more rewarding - like a bonus?
Let’s find out, in this article!
What Happens if You Don’t Make a Claim?
If you drive safely and make no claims during the policy period, your insurer will acknowledge that fact and reward you for it. A No Claim Bonus(NCB) is the reward. It is a discount that an insurance company gives you on the own damage premium amount which you pay for not making any claim in a policy year.
The no-claim bonus can range from 20%-50% if there is no claim made by you for more than 5 years. It gets capped at 50% after 5 claim-free years.
Here’s a table that demonstrates how the NCB increases with the number of claim-free years -
|No Claim Bonus Discount %
|After 1st claim-free year
|After 2nd claim-free year
|After 3rd claim-free year
|After 4th claim-free year
|After 5th claim-free year
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If you make a claim during the policy period, you lose out on the No Claim Bonus. And even if the NCB accumulated is 50%, it will reset to 0% in case a claim is made, irrespective of its size.
Raising A Claim Vs. Saving No Claim Bonus - What To Choose?
Making a claim will lead to a loss of NCB, and will increase the premium amount for the next year at the time of renewal, since you will lose the discount on your own damage premium.
As discussed, your No Claim Bonus will be affected even if the size of the claim you raise is small.
It's better to understand the payment process of a claim. When a claim is raised to the insurer, they deduct a certain amount from the claim money before paying it to you. That includes the cost of consumables, deductibles, and the depreciation value of the parts of your vehicle.
Now, if, unfortunately, your car meets with an accident that causes damages to the car, your instant thought will be to raise a claim with the insurer. But what if the claim is of a smaller amount? Is there any point in raising the claim at all?
Let's Take An Example And understand How Smaller Claims Work.
Suppose, your car meets with an accident and it leads to some minor damages of Rs. 5000. Post raising a claim, the insurer will deduct the compulsory deductible, depreciation charges, and consumable charges from the claim amount, and then make the payment to you,
Let’s say, the vehicle’s Cubic Capacity (CC) is more than 1500, so the compulsory deductible will be Rs.2000/- and let's say the consumable charges amount to Rs. 500/-. Anothe Rs. 1000/- gets deducted for depreciation.
So the amount payable will be:
Rs. (5000 - 3500) = Rs. 1500
Here, as you can see, if you raise a claim, you will end up paying more money than the insurer.
Now, let’s say you have a 25% No Claim Bonus on the policy. Upon raising a claim, you will lose out the discount on your next renewal.
In this scenario, it seems better to shell out some money from your pocket and get the vehicle repaired, so you can save your No Claim Bonus.
Now Let’s Look At A Different Example.
You purchase a policy for your car with zero-depreciation and consumable cover as add-ons in the policy. Unfortunately your car met with an accident and the windshield of the car is cracked. A replacement will cost you around Rs. 7500. You raise a claim with the insurance company.
As you have already taken a zero depreciation and a consumable cover , the insurer will not deduct any amount for the same.
Say your engine capacity is more than 1500 CC and so, the compulsory deductible will be Rs 2000.
So, the amount payable = Rs.(7500 - 2000) = Rs. 5500
Here you will just have to pay the compulsory deductible and the rest will be taken care of by the insurer. Now, say that your policy has a NCB of 20%. In this scenario if you think of saving the NCB, you will have to shell out a huge amount from your own pocket. As your contribution to the expenses is only Rs. 2000, it is better to let go of the NCB and let the insurer cover the cost of the repairs
You buy insurance so that the expenses of your car get covered and you do not have to pay from your own pocket. Now, it completely depends on you if you want to raise a claim for a smaller amount or save the No Claim Bonus.
It is important to note that if you have to pay more at the time of claim than what you are receiving from the insurer, then it is better to pay for the expenses yourself. However, sometimes, raising a claim becomes inevitable, when there are huge expenses incurred due to an accident. To raise a claim or not to raise a claim - is always going to be your choice. We hope you make a good one!