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Do Accident Claims Increase Car Insurance Premiums?
Dec 24, 2022

Does Making an Accident Claim Increase Your Car Insurance Premium?

Life is full of surprises, some good, some bad. While the good surprises can bring joy, bad surprises, like an accident, can be disturbing, for you, as well as your family. Thus, it is best to be prepared for them. A car insurance policy is a robust way to deal with unpredictable events such as an accident. Even if you are an experienced driver, ensuring appropriate precautions might keep you safe. But not all accidents occur due to your fault. At times, it can be a distracted driver on the road that collides with your car, and in turn, damages your vehicle. The same may happen due to some fault of yours. Thus, your car insurance policy helps you avoid financial losses due to such kinds of events.

Types of car insurance plans available in India

When deciding which type of policy to choose for your car, there are three alternatives — third-party plans, own-damage insurance, and comprehensive policies. Of these three, only the third-party policy is a minimum required insurance coverage. The Motor Vehicles Act stipulates this requirement, and failing to comply with it attracts hefty penalties. 1. For third-party plans, the coverage available is for liabilities due to a third person. It covers injuries as well as property damage of such third-person but does not provide any coverage for damages to the policyholder's vehicle. Thus, it is also known as a liability-only cover.  2. An own-damage car insurance policy is what can be bought in combination with a third-party plan that helps overcome its limitations. As the name suggests, this policy compensates for the damages to your car. However, having only an own-damage cover does not ensure legal compliance, and thus, must be paired with third-party coverage. 3. Comprehensive car insurance is a policy that combines both the above-mentioned insurance policies into one. Here, you get third-party coverage, as well as own-damage coverage in one policy. Thus, protection from natural disasters, man-made perils, accidents, and liability protection, is available in a single plan. These comprehensive plans can be further enhanced in their coverage using add-ons that impact the overall car insurance prices.

Are car insurance premiums impacted after raising a claim for an accident?

Despite being a careful and safe driver, an accident-like situation may occur unannounced. Hence, it is important to know what happens to the premium amount when you request an accident claim amount. Making an insurance claim does affect the overall insurance premium. The insurance company extends its coverage to protect repairs in exchange for the premium. This premium amount is arrived at assuming a certain degree of risk that is underwritten by the insurance company. * But, when you raise a claim, the insurer considers you to be a risky policyholder. The risk classification for you, in the eyes of the insurance company, degrades, and a higher premium is charged in the future at the time of renewal. For repeated claims with the insurance company, the insurer will levy a higher premium in that case. Some insurance companies may offer a lower coverage, whereas some may even restrict the number of add-ons you can opt for. Thus, raising an insurance claim does impact the overall insurance premium. * When you choose to not raise a claim and carry out the repairs on your account, there is no impact on the renewal premium. But keep in mind that this scenario is limited to only those times when no inspection is carried out before your policy’s renewal, which is generally when you renew the plan before its expiry. However, if your car insurance policy’s coverage ends and you renew it later, the inspection may show the repairs made on your car and inadvertently impact the overall insurance premium. To know how it impacts you, you can make use of a car insurance premium calculator.

Do third-party premiums get impacted due to accidents?

Since a third-party claim is not triggered during an accident for the damages to your car, it does not impact the third-party premium. Moreover, third-party premiums are set by the regulatory body, the Insurance Regulatory and Development Authority of India (IRDAI). You can visit the official website of IRDAI for further details. Thus, there is no impact on the overall third-party policy’s coverage and premium.

What is the impact on the premium after an accident?

The insurance policy’s premiums are impacted in either of two ways:
  1. By way of premium loading, where the actual policy premium is increased, considering the policyholder to be a risky individual.
  2. By way of a loss of no-claim bonus where the accumulated concessions are withdrawn when you make an insurance claim. You can visit the official website of IRDAI for further details. This results in restoring your renewal premium to its original amount.
  *Standard T&C Apply Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.

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