How Much Do Car Insurance Premiums Rise After Filing a Claim

Impact of Filing an Accident Claim

To the question, “Does filing a Car Insurance claim increase the policy premium in the following billing cycle?” The answer is “yes”. This is because filing an insurance claim removes the effect of the NCB during the following policy renewal. Another reason why insurance rates go up after raising a claim is because raising a claim increases the risk to the insurance company. We will discuss in detail both these causes of policy premium increase in the next section.

 

Why Does the Premium Increase After Filing a Claim?

Here are the two main reasons why policy premiums increase after a claim is raised.

 

1. No Claim Bonus: NCB is a discount in the Own Damage (OD) component of Car Insurance provided after the completion of every claim-free policy period. After five years of continuous claim-free years, this discount maxes out at 50% of the OD premium. As a result, by filing a claim, you instantly cancel the NCB, which causes the premium to return to its pre-discount level during policy renewal.

 

2. Premium Loading: When a policyholder raises multiple claims during a policy period, they become a liability to the insurance company. Therefore, the insurer increases the premium of such customers. In insurance, we call this Premium Loading. The extent of cost increase will depend on multiple factors such as the nature of claims, vehicle condition and the customer’s claim history.

 

Factors Influencing Car Insurance Premiums

The following are the key factors that influence Car Insurance premiums.

 

1. Engine Capacity

A vehicle’s engine capacity is a factor taken into account in policy premium calculation. The increase in car premium is proportional to their engine capacity. Therefore, cars that have a higher engine capacity are charged with a higher premium as compared to cars with a lower engine capacity.

 

2. IDV

The amount that the insurance company will pay the insured in the event that their vehicle is stolen or lost is known as the Insured Declared Value (IDV). Usually, this sum is equal to the car's current market value. The IDV of a vehicle is taken into consideration when computing Car Insurance premiums.

 

3. Vehicle Age

Vehicle age is another criterion that is factored in during Car Insurance premium calculation. This is because it influences the IDV and depreciation of a car. We discussed IDV in the previous point. Depreciation is the reduction of the financial value of a vehicle with age. Vehicle ages are classified into three categories. The first category is cars not exceeding five years. The second category is cars exceeding 5 years but not exceeding 10 years. And the final category is cars exceeding 10 years.

 

4. Location

Vehicle location is considered for premium calculation. Based on the location of registration, cars are categorised as being from Zone A or Zone B cities. Zone A consists of Chennai, Ahmedabad, Bangalore, Kolkata, Hyderabad, Mumbai, Pune and New Delhi. While all the other cities come under Zone B.

 

5. No Claim Bonus

No Claim Bonus (NCB) is a reduction in the Car Insurance premium provided for customers who have completed a claim-free policy year. You can gather a maximum discount of 50% by completing five claim-free years. Please note that if you make a claim, you will lose all the accumulated NCB.

 

6. Add-Ons

Add-Ons are additional coverages available with Comprehensive Car Insurance. They help to enhance the existing coverage of a Car Insurance Policy. There are different Add-Ons offering different insurance solutions. The cost of each Add-On varies according to its coverage, which has an impact on the policy rate.
 

7. Deductibles

A deductible is a fixed sum that the insured agrees to pay from their pocket during a claim. The insurance provider will financially contribute only to the remaining expenses after subtracting this deductible amount. Generally, the higher the deductible you opt for, the lower the premium payable.

 

Strategies to Minimize Premium Increases

Here are some tips to minimise premium increases in Car Insurance.

 

1. Avoid Raising Claims: As discussed earlier, raising a Car Insurance claim will make you unqualified for receiving an NCB. Moreover, if you file several claims during the course of your policy, your insurance company may increase your premium in the ensuing billing cycle. Therefore, refrain from raising claims for minor repairs.

 

2. Opt for a Voluntary Deductible: Deductible is the amount that you have to pay first towards car repairs during a claim before your insurance company starts contributing. Generally, the higher the deductible you choose, the lesser the premium you need to pay. However, choose a reasonable deductible amount to avoid facing financial strain during a claim.

 

3. Fit Anti-Theft Device: Another way to decrease your Car Insurance Premium is to fit anti-theft devices. This will give confidence to your insurance provider that your vehicle is less likely to get stolen or broken into. However, it is important to note that this discount can be availed only if you have installed an ARAI-approved anti-theft device.

 

Wrapping Up

To wrap up, let’s recap some of the key points. Making a Car Insurance claim can cause the policy premium to increase in the next payment cycle. This is because the No Claim Bonus (NCB) will no longer apply once you make a claim, so you will have to pay the full premium amount. Additionally, if you make multiple claims within the same policy period, your insurance provider may view this as a higher risk factor, which could result in them increasing your premium at the time of policy renewal. So, avoid making unnecessary claims.

 

FAQs

1. Does raising claims increase Car Insurance premiums?

Yes, raising a claim does increase Car Insurance premiums. This is because the moment you make a claim, you lose your No Claim Bonus (NCB), a discount awarded after the completion of a claim-free policy period.

 

2. How much can I expect my Car Insurance premiums to increase after filing a claim?

The increase in Car Insurance premiums after filing a claim will depend on multiple factors, such as the nature of the claim, your claim history, accumulated NCB, company policies, etc.

 

3. Will a Third-Party Car Insurance claim increase my Car Insurance premium?

No, generally, Third-Party Car Insurance claims will not increase your Car Insurance premium as the NCB is applicable only to the Own Damage component of your Car Insurance Policy. Thus, there will not be any change in policy tariff during the following renewal cycle.