Impacts of accidents on insurance premiums
One of the most important parts of owning a car is having active insurance coverage. Insurance is a safety net that protects owners from considerable financial loss due to accidents.
Accidents can happen to anyone at any time. People are always advised to drive as carefully as possible and try to avoid accidents. Accidents have an impact on the car itself and the amount of premium charged by insurance companies. The fact is that accidents lead to the exclusion of several benefits from the amount of insurance. It is therefore extremely important to know how accidents have an impact on insurance and how to reduce these effects.
What is the impact of accidents on insurance?
Here are the different insurance impacts due to accidents:-
- Loss of bonus without claim: The no-claims bonus is one of the easiest ways to get a reduction on the total amount of insurance. Imagine building an unclaimed bonus for over five years and then disappearing instantly. The major problem with accidents is that the no-claims premium acquired so far is immediately cancelled.
- Declared lower insurance value: The insurance declared value or IDV keeps decreasing due to accidents. If the insurer sees repeat claims being made, the IDV is reduced. This has an impact on the amount of insurance, but it also lowers the resale value of the car.
- Higher premium due to loading: Loading is a method by which insurers “punish” reckless drivers who often have accidents. When loading is added to the insurance, the premium amount increases. There are two reasons why charging is applied – a) to cover the extra cost that accompanies accidents b) to prevent the person from making frivolous claims.
How to reduce the effect of accidents on insurance premiums?
There are several ways to reduce the impact of accidents on insurance premiums:-
- Driving safely: It is obvious. The safer a journey, the lower the risk of accidents. Don’t get distracted while driving, such as using the phone or talking. You could even take courses that teach you how to drive more safely.
- Do not make frequent complaints: We have seen that frequent complaints backfire on the customer. This is a major problem that can be avoided by not making frequent insurance claims. Avoid loading cases or even a reduced IDV for the vehicle.
- Do not make small complaints: Suppose a customer needs to have a small part of the car repaired – the best thing to do is to have it repaired out of pocket. Small claims can be costly in the long run. Like the point above, making small claims repeatedly affects the overall cost of the premium amount.
- Choosing a higher deductible: Higher deductibles mean the insurer has more confidence in the owner’s skills in driving and maintaining the car. Purchasing an insurance policy with a higher deductible reduces the overall premium amount.
Insurance coverage provides a safety net for car owners against accidents, but there should be no compromise on safe driving practices to avoid accidents altogether.