When to File a Car Insurance Claim and When Not to Do So?

Having a car insurance is essential to protect you financially in case something happens to your car, and it is damaged in an accident or even stolen. This is when you will likely be thinking of making a car insurance claim.

At Digit Insurance, we love claims. Because at the end of the day, we understand that claims are why most people need to have a car insurance. In fact, we have a claim settlement ratio of 97%* for private cars!

But, sometimes, raising a car insurance claim may not be the best solution. It is important for you to know whether to claim car insurance or not, as in some situations (such as making frequent claims), doing so can make your insurance premium go up.

Since there are no hard and fast rules for filing a claim, you should know some basic facts to help you decide whether you want to file a car insurance claim or avoid doing so.

*For the time period October 2020 – March 2021

There are some situations where it is beneficial to you to file a car insurance claim. Some examples are mentioned below:

1. When the Damages to the Car are Severe

In case the damage to your car is severe, for example, if it requires a considerable amount of repair or replacement of many parts, you should go ahead and file a claim. In such cases, the claim amount is likely to be high, and you will likely need all the financial help you can get.

2. When the Claim Amount is High

Even if the damages to your car doesn’t seem severe, in some cases, the cost of repairs might end up costing a large amount of money.

But remember, when you make a claim, the compensation is decided based on the insured declared value (IDV) of your car. The IDV is the maximum amount the insurance company will pay as a claim, so in such cases, to ensure that the claim amount is enough to cover all of your car’s repairs, it is important to pick the right IDV.

3. When There Has Been Theft of the Car, or Fire Damages

If the worst has happened, and your car has been stolen, or it has been gravely damaged in a fire, you must file a claim to recover its cost. In such cases, filing a car insurance claim will not only help recover the financial costs of the vehicle, as if the car is not recovered, but you will also be able to get back the entire IDV of your vehicle for your claim.

But, remember that to avail of this, you must have a comprehensive policy that covers instances of theft and own damages to your vehicle.

4. When Your Car Has Caused Damages to a Third Party

If you have been involved in an accident, and your vehicle has damaged someone else’s property or injured them, they will wish to file a claim against your insurance policy. You will have to share a copy of your car insurance policy so that they can make the claim, and the insurer will pay the required compensation on your behalf.

Additionally, in such cases, if your car has suffered any damage, you might need to file a claim under your insurance as well.

Since making claims can also affect your policy and its premium, it is good to keep in mind that there are some cases where it might be better not to make a claim:

1. When It Is a Case of Minor Damages

If your car has only suffered minor damages, such as small dents, scratches, or broken mirrors, the cost of repairs may not amount to much. Thus, keeping in mind that making a claim may increase your premiums, or cost you your no claim bonus, it may be more cost-effective to settle the repairs yourself.

2. When You Only Have Third-Party Car Insurance

In case you only have a third-party car insurance, and not a comprehensive policy, or an own damage policy, you will only be covered in case of bodily injury or damages to third-party property.

This means that you will not be covered for any damages to your own car, whether due to an accident or a natural calamity like an earthquake or a flood. So, if your car has been damaged, you cannot file a claim as it will be rejected. For more complete coverage, it is best to opt for a comprehensive car insurance policy.

3. When the Deductibles Are Higher Than the Losses

The deductible is the amount that you need to pay out of pocket at the time of a claim before your insurance company pays for the rest. So, if the cost of the repairs is less than or slightly more than this deductible amount, then it is not worth making a claim.

For example, say you were in an accident and your car suffered some damages that total ₹1,000. But your insurance policy has a compulsory deductible of ₹1,500. So, since the claim amount is less than the deductible, it will not be admissible.

In a second example, if your claim amount was ₹2,000, in this case, you will have to be out the deductible of ₹1,500 before the insurance company will cover the remaining ₹500. But since filing a claim will cost you your NCB and this is not a large amount, it might not be worth making a claim.

4. When You Want to Protect Your No Claim Bonus

When you complete a policy year without making a claim, your insurer will give you a No Claim Bonus (or NCB), which is a discount on your own-damage premium* amount on renewal. This accumulates each year with 20% for the first year and up to 50% for 5 claim-free years.

Thus, if the cost of repairs is lower than this discount, making a claim can wipe out your NCB and you will have to accumulate it from scratch again. On the other hand, if you pay this small amount out of pocket, you will preserve your NCB and pay less for future premiums.

For example, if your own-damage premium is around ₹3,000, and you have had 3 claim-free years. Then your NCB will be 35% or ₹1,050. Thus, the total repair cost is less than this amount, it does not make sense for you to make a claim and lose out on your NCB benefit for the next year.

*Note: Comprehensive car insurance premiums are made up of two components, one for own damage and one component for third party damages. If you have a standalone own damage policy, the NCB for that will be calculated separately.

5. When the Damage Is Caused by a Third Party’s Fault

If there has been an accident and your car has been damaged due to someone else’s vehicle, you can claim third-party insurance from them. Once you have filed an FIR, you can use the person’s third-party car insurance details and raise a claim under their insurance policy.

In this case, the compensation will come from their insurer, so you do not need to file a claim for your own damages under your own insurance policy.

While you now know that there are no limits on the number of car insurance claims that you can make during the policy year, you can also see above that frequent claims can affect your policy and its premium. Thus, there are some cases where it might be better not to make a claim:

• The claim amount is lower than the deductible – if the cost of repair is less than, or equal to the deductible (i.e., the amount you need to pay out of pocket before the insurer covers the claim), it is not worth making a claim.
• The NCB is higher than the claim amount – when the discount offered by your No Claim Bonus is higher than the total repair cost, it is not advisable to file a claim, as it will result in you losing your NCB.
• The damages to the car are minor – in case of minor damages, such as small dents, scratches, or broken mirrors, it may be more cost-effective to settle the repairs yourself.

On the other hand, here are some scenarios where you can consider making a claim:

• The damages are severe – for damages to your car that require a considerable amount of repair or replacement, you should go ahead and file a claim.
• The car had been stolen – if your car had been stolen, you must file a claim to recover its cost.
• The claim amount is high – when the claim amount is high, especially when compared to the total IDV of the vehicle, you need to consider making a claim. 
• Third-party claims – in case you have been in an accident and the other driver was at fault, you will be able to file a claim under their vehicle insurance. But remember, you don’t need to file a claim under your own insurance in this case.