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Small Claims under Car Insurance

Car insurance is an agreement between the Insured and the Insurer where the insured pays a certain premium for coverage against any loss or damages to car due to unforeseen consequences. The premium paid by the insured is to provide coverage in case of any claim. But we need to think whether it makes sense to file small claims under car insurance policy?

Should you file Small Claims under your Car Insurance?

Mr. Raffi has purchased a brand new Hyundai car and took online car insurance from a reputed insurance company for a period of 1 year. He has visited online portal for car insurance online and did car insurance comparison using the car insurance calculator. Finally after checking the car insurance quotes he opted for the best car insurance as per his needs.

While he was driving it home from office he met with a minor accident and the there were scratches on the front bumper of the car. He was deeply saddened with this incident as his car was purchased recently, but he was comforted by the fact that his car is insured and the insurance claim will be paid by his insurer.

He took the car to a nearby showroom to arrive at the claim amount and found the claim amount to be Rs.6000 including the service and labour charges. He shared this incident with his friend and also told him that he was planning to file a claim for the same. However his friend advised him against it now putting Mr. Raffi in dilemma. His friend advised him against filing the claim as the repair amount is very less and instead pay for the repairs from his pocket.

Not fully convinced Mr. Raffi felt that as his car was insured it was his right to file a claim. However, he was also worried about the side effects of making a claim i.e., how would it impact his claim history and renewal premiums?

Concept of Compulsory Deductible/ Excess:

Compulsory deductible or excess is a part of the claim amount that has to be borne by the insured in the event of claim. The compulsory deductible is also called as excess and is applicable while making claim. In simple terms deductible is the amount that you have to pay from your pocket in the event of a claim post which the insurance company settles the remaining amount. For example you have made a claim of Rs.10, 000 and the deductible for your car is Rs.1500, in this case insurance company will settle only Rs. 8500. The remaining amount has to be borne by you known as the compulsory deductible.

The compulsory deductible has two slabs in the Car insurance, they are:

Cubic Capacity (cc) Compulsory Deductible Amount
Less than 1500cc Rs.1000
More than 1500cc Rs. 2000

Calculation of Claim Amount:

A no claim bonus is normally given by insurers on the renewal premium if there is no claim in the expiring policy. This no claim bonus starts at 20% and goes up to 50% for each claim free year. Even if a single claim is made, the NCB goes back to 0%, which is another reason to think twice before filing small claims.

Let us take the above example, assume Mr. Raffi’s policy has a deductible of Rs.2000 and the NCB on the policy is calculated to be Rs.6000 which is 35% NCB slab. As stated above the claim amount was around Rs.6000, then Mr. Raffi has to pay Rs.2000 from his pocket and the remaining Rs.4000 will be settled by the insurance company. But at the time of renewal he’ll end up losing the No claim bonus amount which is Rs.6000. Here it makes monetary sense to make claim only if the claim amount is above Rs.10000.

So it is wise to forgo the NCB only if the claim amount is higher and bear the repair expenses from your pocket if the claim amount is small. Since the No claim bonus is calculated only on the Own damage section of the policy, every Third party claim is to be reported to the insurance company for claim.

After the expired car insurance, the new policy is issued once the pre inspection report is satisfactory and the period of insurance starts from the day of premium payment. Car insurance expired when the renewal is not done within the expiry date. Once the policy expires, inspection would be mandatory by the insurance companies before accepting the risk.

Remember to file a claim only if the Claim amount is higher than the No claim bonus discount and deductible.

Also remember insurers prefer cars with No claim bonus (NCB) intact. Vehicles with No claim bonus have a chance of getting higher discounts and low premiums.

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