Think twice before making your car insurance claim

The post-July 2002 norms now restrict the no-claim bonus to a maximum of 50 per cent. The present status on the no-claim bonus is 20 per cent for year 2, 25 per cent in year 3, 35 per cent in year 4 and 50 per cent in year 5.

The present rules on no-claim bonus has further been tightened against the car owners. Earlier (before July 2002), if a vehicle owner made an insurance claim in any particular year, the premium rate was shifted to one-notch below. For example, if a owner had made a claim in the fourth year, he would have availed of a bonus of 50 per cent instead of the then prescribed rate of 65 per cent in year 5. If there was no further claim in the following year, the vehicle owners were entitled to a no-claim bonus all over again.

Under the present rules, however, if a claim is made in year 4, in the next year, they are not entitled to any discount at all. So, before making any plans to make a claim, it would make sense to keep this all these premutations and combinations in mind.

Hence, for car owners it might not make sense to make a small claim of say Rs 3,000 if they land up paying more as premium which otherwise would have accrued as no-claim discount. If the claim amount is as less as Rs 3,000 and the car owner would enjoy a no-claim bonus of 35-50 per cent on a base premia of Rs 12,000, it would make little sense to make the claim on the insurance company. Car owners would need to make these calculations before deciding on the claims.

The other important issue to look out for while going for your car insurance would be the amount you are getting your car insured for. Changes in the norms also include strict rules on the amount for which the vehicles would be ensured. If the value of the car is say around Rs 5 lakh and the owner wants the insurance amount to be the same, it is possible to do so only within six months.

Straightaway there is a depreciation of 5 per cent in the first year (if you do your insurance after six months), 15 per cent in the second year, 25 pre cent in third year, 35 per cent in fourth year, 40 per cent in fifth year. The depreciation rate is as high as 50 per cent for cars which are beyond 10 years old. Hence a car of Rs 5 lakh would be insured for Rs 4.75 lakh if the insurance is made in the first year and after six months. It would be insured for Rs 4.25 lakh if the insurance is made in the second year and so on.

Further, third party cover premium has gone up from an average of Rs 278 to Rs 500. Third party insurance covers claims, which the car owner make to pay the people they hit in case of an accident. Hike in third party premium has pushed up the overall premium.

There is always a possibility that the car owners may get confused before making their claims. It would make sense in such a situation to consult the respective insurance agents before deciding on the claims.