Impacts of Accidents on Insurance Premiums

Accidents can happen to anyone at any time. It is always advised that people drive as safely as possible and try to avoid accidents. Accidents impact the car itself and the premium amount charged by insurance companies. The fact is that accidents lead to several benefits getting excluded from the insurance amount. It is therefore extremely important that one knows about how accidents impact insurance and how to reduce those effects.

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How do accidents impact insurance?

Here are the different impacts on the insurance due to accidents: -

• Loss of No Claim Bonus: The No Claim Bonus is one of the easiest ways to get a discount on the total insurance amount. Imagine building a no-claim bonus for more than five years and then instantly disappearing. The major problem with accidents is that the no claim bonus gained so far is swiped out immediately.
• Lower Insurance Declared value: Insurance declared value or IDV keeps on getting decreased due to accidents. If the insurer sees that repeated claims are being made, the IDV gets reduced. This impacts the insurance amount, but it also lowers the resale value for the car.
• Higher premium due to loading: Loading is a method by which insurers “punish” reckless drivers who get into accidents often. When loading is added to the insurance, the premium amount goes up. There are two reasons as to why the loading is applied – a) to cover for the extra cost that comes with accidents b) to prevent the person from making frivolous claims.

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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: This is a no-brainer. The more safely one drive, the lesser are the chances of accidents occurring. Do not engage in any distractions during driving, such as using the phone or talking. One could even take courses that teach how to drive more safely.
• Not making frequent claims: We saw that frequent claims backfire on the customer. That is a major problem that can be avoided by not making frequent insurance claims. Avoid cases of loading or even a reduced IDV for the vehicle.
• Not making small claims: Say a customer has to have a small part of the car repaired – the best thing to do is to have it repaired from one's 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.

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• Choosing a higher deductible: Higher deductibles means that the insurer has more confidence in the owner's driving and car maintenance skill. Purchasing an insurance policy with a higher deductible reduces the overall premium amount.

Insurance cover offers a safety net for car owners against accidents, but there should be no compromise on safe driving practices to avoid accidents entirely.