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Puzzler: Do Car Accidents Affect Insurance Premium?

Team AckoJan 17, 2024

You might be a good driver, still, there is no guarantee that your car-ride will be accident-free. This is because of unpredictable factors like the other drivers on the road. Some driver might have a bad day and accidentally run into your car. There is a possibility that a biker might appear out of nowhere from your left and force you to steer right and bang into the divider! Here’s hoping that such a thing never happens to you but be aware that such things do happen. That is the reason why this statement is repeated umpteen times – accidents are unpredictable. As a policyholder, you might wonder if car accidents affect your car insurance premium? Read ahead to know more.

Contents

Accidents and Insurance Premium:
Car Insurance and Risk:
Reasons for Increase in Premium Post Car Accident Claim:
- Premium Loading:
- No Claim Bonus:
Lower Premium Despite Car Damage:
Frequently Asked Questions:

Accidents and Insurance Premium:

Car accidents do affect your insurance premium if you raise a claim for them. If you have a history of making regular claims, your insurance premium is bound to shoot up. If you are involved in a car accident and do not raise claims for it, your insurance premium is unlikely to increase unless you are in a situation where the insurance company wants to check your car before insuring it.

Car Insurance and Risk:

Insurance companies offer a cover in exchange for a premium. They cover risks. The more the risks, the more the premium to buy the cover. If a person has a history of raising claims, that person is flagged as a ‘risky profile’. This means more risks and as a result, means more insurance premium.

In the case of repeat claims, the car insurance company might decide to offer a reduced cover. They might cut off some Add-ons or not offer a Comprehensive cover at all. Also, they might just offer the basic Third-party Liability cover.

Reasons for Increase in Premium Post Car Accident Claim:

Listed below are two reasons why there might be an increase in your Comprehensive car insurance premium in case of car accident claims.

Premium Loading:

In simple words, you will likely be charged more premium if you have raised claims regularly. This additional premium is termed as Loading. This is done because someone with a history of repeat claims is often perceived as a risky prospect. And high risk equates to high premium.

The amount of Loading can be in the range of 10% to 15% of the previous premium. The percentage can depend upon the type of claims raised, the amount given in claim settlement, the Insured Declared Value (IDV) and the condition of the car.

No Claim Bonus:

If you raise a claim, you miss out on the No Claim Bonus, which is a discount on policy renewal. It is offered for not raising claims during the previous policy period. This bonus or discount increases for five years if no claims are raised. Note that the yearly calculation can be different in case of short-term and long-term policies. You can find out about the same by checking out the respective Policy Wordings.

For example, if you were eligible for a 10% No Claim Bonus on renewal (before raising a claim), you will not receive the same in case you have raised a claim (and it was settled successfully). This will lead to a higher premium amount as compared to what it would have been if you had not raised a claim and received your No Claim Bonus.

Also, read: Why Does Car Insurance Premium Increase Every Year?

Lower Premium Despite Car Damage:

Here’s how you can avoid a massive hike in car insurance premium despite damage to your car.

Avoid Claim:

If the claim is of low value, you can avoid raising a claim and repair your car on your own. This way, you can avoid Loading, if any. You will also keep your No Claim Bonus intact.

No Claim Bonus Protect:

There is a way through which you can raise a claim and still avail the benefits of a No Claim Bonus, you can purchase a No Claim Bonus Protect Add-on. With this Add-on, you have the freedom to raise one or two claims during a year and keep the No Claim Bonus active. Note that you will have to spend extra to buy the Add-on.

Anti-theft Device:

Installing an anti-theft device certified by the Automotive Research Association of India (ARAI) can lead to a reduction in car insurance premium. Car claims might increase your premium on one hand but installing a theft prevention gadget can help to lower the premium to an extent.

Voluntary Deductible:

You have the option to increase the Voluntary Deductible while renewing your car insurance policy. This means you are willing to share the financial burden if the insured car faces any damages. As a result, the insurance company will be giving a relatively lower amount in claim settlement.

Thus, the premium charged for the car will be lower than usual. However, be wary while choosing a Voluntary Deductible as it defies the purpose of insurance if you are willing to bear a lot of the burden when it comes to car damage.

Digital Insurers:

You can consider switching to a new-age car insurance company while renewing your insurance if your insurer is charging a lot of premium. Digital-first companies are known to offer car insurance policies at a lower premium without compromising the coverage or the features offered by a Comprehensive policy.

Also, read: Car warranty vs insurance. Which is better?

Frequently Asked Questions:

FAQs

Will car accidents affect the insurance rate of my Third-party Liability policy?

Third-party Liability policy’s rates are determined by the Insurance Regulatory and Development Authority of India (IRDAI). Insurance companies are not allowed to modify the car insurance premium stated by the IRDAI.

Can I choose to buy a No Claim Bonus Protect Add-on if I have claimed during the previous policy period?

You can buy a No Claim Bonus Protect Add-on but it will be for the following year. It will protect the following No Claim Bonus and will not have an impact if you have made a claim during the previous policy period.

Will one small claim result in Premium Loading?

Premium Loading usually occurs when the claims are on the higher side and made frequently. One small claim might not result in Loading, however, it will negate your No Claim Bonus.

Can I switch to a Third-party Liability policy if my insurance company is charging more premium for a Comprehensive policy?

You can switch to a Third-party Liability policy while renewing car insurance, however, it will result in low coverage. You will not have Own Damage cover that comes along with a Comprehensive policy. For better coverage at an affordable rate, you can consider checking out car insurance quotes put forward by new-age digital insurance companies.

How much car insurance goes up after an accident or how much does insurance go up after a minor accident?

There is no fixed amount by which the insurance cost will go up in case of an accident, be it a minor one or a major one. Several factors need to be considered. Some of them are the type of claim raised, claim history, No Claim Bonus, car’s value, etc. The car insurance will not increase by much even after a car accident if you follow the points mentioned in the ‘Lower Premium Despite Car Damage’ section of this article.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet; and is subject to changes. Please go through the applicable policy wordings for updated ACKO-centric content and before making any insurance-related decisions.

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