Motor Insurance - When to file a claim and when not to

After doing a good amount of research, you finally settle in on a model of bike you want to buy. You also ensure that it is protected with the most appropriate insurance policy. You diligently pay the insurance premiums and maintain the vehicle in prime condition. So, if you happen to be involved in an accident, refraining from filing a claim will actually seem like a waste of money. Yet sometimes, this is precisely what you should do in order to save money.

The practise of filing a two-wheeler insurance claim whenever your vehicle suffers a damage may get you payouts at taxing times. But, your motor insurance premium is likely to go up following the claim payout. You may also lose out on your hard-earned No Claim Bonus (NCB) that promises a discount on renewal premium. So, think twice before submitting that claim form. This is relevant to car insurance as well.

The availability of car finance makes it easier to pick a vehicle. However, you will still have to painstakingly do research and decide on a car model. After all, it is one of the most expensive purchases you will ever make. So, protect it with adequate insurance and refrain from raising small claims under your insurance policy.

When should you file a claim

If your vehicle is involved in an accident that has caused property damage, injuries, or death to a third party, it makes sense to file a claim. Based on the magnitude of the damage, you could be liable to pay a huge amount as compensation for the loss. Here are some guidelines on when you should tell your insurer about an accident and record a claim:

You have rammed into another person’s vehicle causing a dent, and he/she is willing to settle it privately.

You should always refrain from making private deals with a stranger, as far as car insurance is concerned. There could be a situation wherein they may demand more money at a later date. You should ideally share the details of your insurance with the third party and request him/her to raise a claim under your liability insurance. You should also inform your insurance provider about the mishap. Do not forget to take pictures of the damage to both vehicles before you part ways.

You have damaged the car of a third party in a serious way.

You should tell your insurer about the incident as the damage may turn out to be more expensive that you imagined. Your liability coverage protects you from lawsuits and your insurer will have experience in handling such situations effectively.

You were responsible for a car accident in which there were injuries.

Injuries can lead to heavy medical bills; so tell your insurer about the accident. If you have taken a personal accident cover for the passengers in your vehicle, this will act as a supplement to their medical insurance plan and compensate them for the injuries.

You have caused a lot of damage to your vehicle in an accident.

In this scenario, you should weigh out the expenses for damage repair against the increase in car insurance premium following a claim. Opt for the more lucrative option.

When should you avoid raising claims

There could be several instances wherein it will be more appropriate to avoid raising claims under your motor insurance.

Consider a situation wherein you have bought only a third-party liability insurance standalone plan for your vehicle. In the absence of an own-damage cover, you will not be liable to receive compensation for damages to your vehicle. This is one instance where you cannot claim for insurance for vehicle damage. You will have to pay for the repair work from your own pocket.

Suppose you have own-damage cover under your car insurance policy. But you backed into a wall and caused a dent in your bumper. Since this is a small damage, you can consider paying for the repair work yourself. Raising a claim under your car insurance in such a scenario will have a number of unwanted repercussions:

No Claim Bonus - NCB is essentially a reward that is offered to a diligent driver who has not raised any claims in a policy year. The driver can benefit from a discount on auto insurance premium for the following year through the accrued NCB. This way, he/she can receive a discount of up to 50% on own-damage premium! However, if you raise a claim under your auto insurance, the NCB will be reset to the initial value. So, it is imperative that you protect your NCB and do not forgo this attractive benefit by raising small claims.

Deductibles - Another factor that you should be aware of is the deductibles/excesses. When you raise a motor insurance claim, you will be expected to compulsorily pay a fixed value that depends on the engine capacity of the damaged vehicle. This is referred to as the compulsory deductible. The voluntary deductible is a variable amount that is agreed upon at the time of policy inception. Only after you pay the deductibles, both compulsory and voluntary, will the insurance provider pay the remaining claim amount. So, before you raise a claim, you should do the following:

Add together the loss of NCB and the excesses you will be paying. This would be the loss you incur from the accident.
Evaluate whether this loss is greater than the actual cost of damage repair. If it is, you should pay for the repair yourself. Otherwise, it makes sense to raise a claim under your insurance.

In a nutshell, follow this rule of thumb before raising claims - you should not make claims for small losses frequently. Such a practise would lead to greater losses in the long run.