Filing for motor insurance claim? Think twice

Neeraj Gupta

People buy motor insurance mainly for two reasons — first and foremost, to protect their vehicle against any damage caused by an accident and secondly, because it is mandatory by law. Out of millions of accidents which happen on Indian roads annually, the vast majority of them are not fatal and claims for such accidents are called petty claims, where claim amount is less than the premium. While most of us prefer filing a claim immediately after an accident, we often face a dilemma on whether or not we should be filing a claim for smaller damages such as scratch or dent.

So, should you file a claim every time?  Here are a few pointers to consider before filing a claim from your insurer:

Do calculation

It is crucial for you to measure your claim amount against deductibles, depreciation and NCB benefits, and decide which one will be beneficial in the long run. Your motor insurance plan comes with a deductible clause that makes you equally responsible for paying some percentage of the total claim amount from your own pocket. This could be anywhere between 10%-20% of total repair cost, depending upon the size of the engine of your car. An inbuilt deductible is called as compulsory deductible and the amount is fixed Rs 1,000 up to 1500cc and Rs 2,000 above 1500cc.

For instance, you have a comprehensive insurance plan without add-ons for a three-year-old car and you apply for a claim of Rs 10,000 to get the repairs done. In this case, you may have to pay somewhere between Rs 5,000 and Rs 6,000 as deductibles and depreciation cost. Your insurer, on the other hand, would pay the rest of money that is Rs 4,000-5,000. So, if you were to make a claim here, you would undergo loss; knowing that you will have to let go 25% NCB and also pay for repairing from your own pocket.

No claim bonus

Apart from this, filing a claim impacts your claim history and creates a perception about your profile in the mind of insurance companies. In simple words, no claim bonus is a report card of your driving abilities. In India, there is no mechanism to calculate your driving skills; therefore, insurance companies rely on NCB. Maintained NCB simply means you have not made any claim in past years and hence you are a safe driver.

Dilemma

Scenario 1: Hitting someone else’s car or property.

You should claim insurance if the damage is considerable. However, if the damage to the third-person’s property is minor and no one got hurt, then the best thing to do is to get the repairs done on your own. That way, you will escape from the hassle of long, time-consuming paperwork for a small amount.

Scenario 2: Damage is going to cost Rs 15,000 or less.

A big NO. Do not claim insurance for such a small amount. Settle it from your own pocket and save the insurance for worse days.

However, you can claim benefits, if you own a new car with 0% NCB and zero depreciation add-on.

Scenario 3: If the car is too old and you’re planning to purchase a new one anytime soon.

Ever heard that you can transfer no claim bonus points to your new car and new insurance? It will be helpful not to dump the NCB benefits over a minor claim and, instead, use them to effectively lower your new insurance premium amount. In any case, you have to sell off the old car.

Scenario 4: You have already made a claim this year.

The number of claims you can make in a year are limited. As far as zero depreciation is concerned, it is limited to two claims per year, after two claims your plan will be handled as vanilla comprehensive policy, so must save it for an even worse scenario.

Making a claim every time may look like a good thing to do for a short-term profit, but in the long term, you will face a bigger loss in terms of no NCB. Moreover, a lot of claims will make your driving history look too dangerous and you may have to pay a higher premium next time you buy an insurance policy. Hence, paying for small repairs from your own pocket will keep you in a win-win situation.

The writer is Head of Motor Insurance, Policybazaar.com. The views expressed in this article are his own