Driving a car exposes you to the risk of an accident or a mishap that can damage your car or a third person’s property. It can also result in a physical injury to you or another person. The costs associated with these damages are usually covered by car insurance policies.
There are two broad categories of car insurance policies available – Third-Party Liability and Comprehensive car insurance. When you buy a comprehensive car insurance policy, the premium is determined by a range of factors, including the age, make, and model of your car, the IDV, your geographical location, etc.
In the unfortunate event of a mishap or accident, you file a claim to get a refund of the money spent. While the insurer pays the claim if it is within the agreed clauses, does it increase the premium after processing the claim? In this article, we will be discussing third-party liability plans and exploring if making a claim on these policies increases the premium amount.
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Third-Party Liability Car Insurance
According to the Motor Vehicles Act, every car in India is required to have an active third-party car insurance policy. If you drive without one, then you can be liable to pay a hefty fine.
As the name suggests, in third-party liability four-wheeler insurance, you are protected against losses caused due to the damage done to a third-party (person or property) if your car gets into an accident or mishap.
For example, if you are backing up your car and erroneously hit another car, causing a dent, then you are liable to pay for the damages. However, since third-party liability insurance is mandatory in India, the cost to repair the damages is borne by the insurance company. However, if your car gets damaged in the same accident, the policy will not cover the costs.
If you want to cover damages to your car or yourself, then you need a comprehensive car insurance policy. In these policies, the insurer offers protection against financial losses caused by damages to you and your car as well as to third-party (person or property). It also offers protection against theft and damages due to fire, natural and man-made calamities, etc. However, these policies are costlier than third-party liability policies.
Impact of Filing a Third-Party Car Insurance Claim on the Premium
The Insurance Regulatory Development Authority of India (IRDAI) determines the premium of third-party car insurance in India. However, insurers have no control over the premium for these policies. Hence, if you make a third-party car insurance claim, the premium amount does not increase.
But, if you have purchased a comprehensive policy or an own-damage policy, then frequent accident claims can result in an increase in the premium amount. However, if you hold a third-party liability policy, the impact is non-existent.
When you buy car insurance, an insurer calculates the premium for a policy considering the following factors:
- Your age
- Location
- Details of the car that includes the make, model, variant, type of engine, and the capacity (cc) of the car
- Additional fittings in the car for boosting its safety
Also, if the insurance provider is offering coverage against damages to your car and you meet with accidents frequently, then the provider might tag you as a high-risk customer. This can result in an increase in the premium amount when you buy car insurance online.
Impact of a Claim On the Premium of a Four-Wheeler Insurance Policy
In generic terms, an insurer calculates the premium for any insurance policy after carefully considering the risks associated with the insured. For example, if we look at a four-wheeler insurance policy, the biggest risk is an accident or mishap. Hence, if a policyholder files regular claims for accidents, then the insurer might look at him as a high-risk customer and increase the premium.
Many insurers opt for Premium Loading in India if they tag a policyholder as a high-risk customer. Usually, this is around 10-15% of the earlier premium and is charged to policyholders with repeated claims. In addition, filing claims can also result in the policyholder missing out on the No Claim Bonus (NCB).
This is usually offered at the time of policy renewal to policyholders who do not file a claim in the previous policy period. Also, if you have accumulated NCB over many years and suddenly start filing claims for accidents, you risk losing the cumulative benefit.
Summing Up
Remember, for the four-wheeler insurance provider, policyholders that don’t file claims are the least-risk customers. Therefore, they offer a lot of benefits to them. On the other hand, policyholders that file accident claims regularly are high-risk. Therefore, the provider can increase the premium for the policy.
Hence, make sure that you drive safely and take all measures to avoid accidents. Also, if you get into a small accident with minor damages to the car, calculate if you want to file a claim or bear the expense yourself. Moreover, ensure that you understand the third party insurance claim process. Good Luck!