Making a claim every time your car gets hit may not be the most practical thing to do. Once you make a claim, you lose the no-claim bonus (NCB), which results in higher premium in the next cycle. On the contrary, if you don’t make a claim for five years in a row, you are eligible to almost 50% discount on premium. So, ideally, you should not forgo the NCB benefit for a minor scratch or dent. The best practice here is to pay for minor expenses from your pocket and continue to enjoy the discounts courtesy NCB while keeping the insurance for major financial distress.
Apart from this, making a claim also impacts your claim history and, from an insurance companies’ viewpoint, you are a risky person where risk is equivalent to number of claims you make. Simply translated, NCB is the report card of your driving skills. In India, there is no mechanism to ascertain your driving skills; so, insurance companies have to depend on NCB.
Do the math
It is imperative for you to weigh your claim amount against deductibles, depreciation and NCB benefits, and assess which one will be beneficial in the long run. Your motor insurance plan comes with a deductible clause that makes you responsible to pay a part of the total claim amount out of your own pocket. This could be anywhere between Rs 1,000 and Rs 2,000 for sub-1,500cc and 2,000cc cars, respectively.
Let’s assume that you have a comprehensive cover with no add-ons for a three-year-old car and you claim R10,000 from your insurer for fixing it. In this scenario, you may have to pay anywhere between R5,000 and R6,000 as deductibles and depreciation cost. Your insurer, on the other hand, would take care of the remaining R4,000-5,000.
If you were to claim insurance in this scenario, you would incur loss; given that you will have to forgo 25% NCB (could be more!) and also pay for expenses out of your own pocket.
To make or not to make a claim
Situation 1: If you hit someone else’s car and it is not your fault
You can claim insurance benefits if the damage is considerable. However, if the harm to the third-party vehicle is minor and noone has been hurt, then the best practice will be to settle it on your own. That way, you will save yourself from the hassle of long-drawn paperwork for a trivial amount.
Situation 2: If the claim amount is less than R15, 000
No. Don’t make a claim for such a small amount. Spend from your pocket now and save the insurance for worse days. However, you can claim benefits from the insurance company if you have a new car with 0% NCB and zero depreciation add-on.
Situation 3: If you are planning to sell off the car sometime soon and have accumulated good NCB points
Did you know that you can transfer NCB points to your new car and new insurance? It will be smart not to waste the accumulated benefits over a minor claim and, instead, use them to drastically reduce your premium amount for the new car insurance. In any case, you have to do away with the old car!
Situation 4: If you have already made a claim in the year
There is a limit to the number of claims you can make in a year. As far as zero depreciation is concerned, it is restricted to two per year, after which your policy will be treated as comprehensive policy.
The writer is CEO & co-founder of policybazaar.com