Should File a Car Insurance Claim for Minor Accident

Ritika did the same thing. She was driving back home from office when she nicked the rear of her car and got a little dent. She promptly thought of raising an insurance claim after reaching home. However, her husband stopped her from raising a claim for such a minor damage. He explained to his disappointed wife that making a claim would actually cost her more.

Surprised? Don’t be. What Ritika’s husband told her was true. She stood to lose more by making a claim rather than by getting the repairs done herself. Want to know how? It was because of the feature called No Claim Bonus. Do you know what it is? Let’s find out:

When you buy a car insurance policy and do not make any claim in the policy year, you earn a No Claim Bonus. This No Claim Bonus gives you a discount in the premium payable when you renew your car insurance policy next year. For every consecutive policy years where you do not raise a claim, the No Claim Bonus discount increases. It starts from 20% for the first year and goes as high as 50%. However, if you make any claim, you lose the entire No Claim Bonus discount. On the next renewal you do not get a discount. Moreover, from the year after the next no-discounted renewal, the NCB discount would again begin from 20%.

Here are the rates of No Claim Bonus discount which are applicable for a motor insurance policy:

Period    Rate of No Claim Bonus discount
After 1 claim-free year    20%
After 2 successive claim-free years    25%
After 3 successive claim-free years    35%
After 4 successive claim-free years    45%
After 5 successive claim-free years    50%
Let us understand how Ritika stood to lose money had she disagreed with her husband:

Age of Ritika’s car    4 years
Applicable NCB discount she stood to earn next year    45%
Expenses incurred to repair the dent    Rs. 1500
Next year’s premium    Rs. 5000
Premium payable after NCB discount    Rs. 2750
Saving in premium    Rs. 2250
Against the repairing expense of Rs.1500, Ritika stood to save Rs.2250 in the next year’s renewal premium if she did not make a claim in the present year. That gave her a saving of Rs.750. Moreover, after the next renewal, when she would have renewed her car insurance policy in the year after next, she would have got only 20% discount if she had made a claim compared to a 50% discount for continuous claim-free years. So, that gives another 30% additional savings in future premiums.

So, which one is the better solution? Raising a minor claim or getting your car self-repaired? If you are convinced that a self-repair is the ideal solution, there is another thing which you should consider. How economic a self-repair is to your case?

What you should do? : In case of minor damages, look at your accumulated NCB discount. If you are in higher tiers where the discount is considerable, go for self-repair. If, however, you are on the first step of the ladder itself, i.e. you face damages in the first or second year of the policy self-repair might not be so economical. So, the ideal step for you to take is to assess your savings. Compare the NCB discount which you would lose not only in the next year but also in the coming years and the cost of the repairs. This calculation would give you your savings which would help you make a decision.

All said, whether or not you should opt for self-repair is relative. It depends on your motor insurance policy, its tenure, total accumulated NCB discount, and the cost of repairs. Only after all these factors are taken into consideration should you make your choice. So, use your math skills or a calculator, if you are bad with numbers, work out your savings and then take a decision