Taking Cover. When not to claim your car insurance 

If you are living in a city like Mumbai, Delhi or Bengaluru, it is common to meet with tiny road accidents or at least end up with a few scratches or dents on your car.

In many such situations, we forego claiming insurance for minor damages owing to the tedious and time-consuming claims process. But there are other situations too, when it makes sense to not claim your car insurance.

Generally, if you have not claimed your car insurance in the previous year, you will get a discount on your next year’s premium. This discount is known as a ‘no claim bonus’, or NCB. Every car insurance premium has two primary portions: a) own damage premium and b) third party premium.

NCB discounts are applicable on own damage premiums. Own damage premium comprises more than 80 per cent of total car insurance premium. Thus, the NCB discounts look sizeable even after neglecting the third party premium portion.

The discounts on car insurance start at 20 per cent in the second year, and go up to 50 per cent in the sixth year. Insurers provide this to encourage insurance buyers to refrain from petty claims.

If you own a small-segment car, such as a Santro, your total premium may be around ₹10,000, of which own damage premium will be approximately ₹8,000.

Now, considering you are in your second year of insurance cover, your NCB shall be 20 per cent of own damage, which comes to around ₹1,600. But if you are in your sixth year, the NCB of 50 per cent shall amount to ₹4,000.

This amount has to be compared with the expected expenses on rectifying the damage through an estimate by an authorised garage.

If you think that the cost of repairs is more than the loss of NCB, you should claim the insurance. If not, you shouldn’t. At the same time, if you are holding a luxury car, the cost of damage may exceed the cost of NCB loss by a big margin. Under such circumstances, it is always advisable to claim the insurance.

Cars which have CNG or LPG kits fitted usually attract higher insurance premiums compared to normal petrol or diesel cars. If you have bought a normal car and installed a CNG or LPG kit in it later, you have to get it endorsed in the RC book/card and update the same with the insurance company immediately.

However, if you did not do it and you vehicle gets damaged in an accident, your insurance claim would instantly be repudiated. You could sometimes lose your NCB as well. In such cases, it’s best not to approach the insurer as a first resort. You need to get your car repaired on your own and later inform the insurer about the installation of a CNB/LPG kit.

Although we rarely use this option, when there are huge NCB benefits on your policy, you should explore the option of claiming third-party insurance claim from the other party involved in the accident if you can prove that it was not your fault.

The process of claiming third-party insurance may be cumbersome though. The difficulty arises from the fact that the claim has to be made at the Motor Accident Claims Tribunal, as civil courts do not decide on motor insurance claims.

One has to file an FIR with the local police and obtain the charge sheet. If you can prove that you are not at fault for the accident and possess the records for payment towards repairs, chances are high that your third-party claim on the insurer will be approved (subject to limits as prescribed by the law). This way you will not lose your NCB benefits either.

The writer is Senior Vice-President, Bonanza Portfolio Ltd

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