Car insurance is often regarded as a compliance norm for many. The various jargon and terms make it a perplexing decision, especially for first-time buyers. If you are familiar with the terms, selecting the right car insurance policy is a breeze. One such term is theno-claim bonus. Let us understand how using NCB benefits can help you save premiums.
What is No Claim Bonus?
No claim bonus (NCB) is a form of concession in renewal premium. The insurance company, for every claim-free year, provides a concession at the time of renewal of your car insurance policy. This concession in your premium makes your insurance policy cheaper after each policy-year without claims.
Does making a claim increase your premium amount?
There is no specific rule that an insurance claim will increase your premium amount. It depends on factors like continued losses each year that make it expensive for the insurance company for which they might increase the premium amount. The increase of your premium is not based on a single claim experience by your insurer. If you do not follow safe driving practices due to which there is poor risk management, the insurer may review the risk and increase the rates of your policy. However, these changes vary from one insurance provider to another andsome insurers may not even increase your premium amounts.
When do car insurance premiums increase?
The insurance premiums, whether you buy car insurance online or offline, are based on the estimation of the risk undertaken. Every plan has its pre-specified rates, which are decided based on the different events covered by the policy and the Insured Declared Value (IDV) of the vehicle. An increase in the third-party premium by the regulatory body, increase in taxation, high severity of loss in a particular geographic region are some situations where the premium rates are increased.
When should you make a claim and when to avoid it?
Since you lose the NCB benefits on making a claim, experts advise skipping claims for smaller amounts. It adversely impacts your claim history, and you lose out on the no-claim benefits. Also, while deciding whether to make a claim or not, do not forget the deductible portion of your policy.
Let us understand this using an example.
The cost of repairs amounts to ₹5000, and the applicable deductible amount is ₹2000, then the amount payable by your insurance company is ₹3000. Now, it is for you to decide whether you can bear this additional expense of ₹3000 towards repairs. If you skip filing a claim, then the no-claim benefits at the time of your car insurance renewal online, can range between 20% to 50%. This amount of NCB depends on the consecutive claim-free years for your policy.
In another example, if the amount of NCB comes to ₹8000 and your policy has a deductible of ₹2000, then any amount of repairs more than ₹10,000 is when you should make a claim. Else, you shall be required to bear the deductible as well as lose out on NCB.
When you compare the various plans, make use of a car insurance premium calculator. This nifty tool will not only help compare the different policies, but also aid in selecting the right add-on coverage options to ensure maximum protection for your car. To conclude, evaluate your capacity to bear a particular expense and then make claims. Claiming for small amounts will not only require you to pay the deductible but also miss on renewal NCB benefits.