When to claim on your car insurance
If you avoid making any claims on your car insurance policy for a year, you could earn a discount of 20% to 30% on your next year's cover -- and motorists who manage to remain claim-free for five consecutive years could enjoy a discount of up to 75% off their premium. Once you've built up this no-claims bonus, you won't want to lose it – and this can make drivers reluctant to claim.
When insurance really comes into its own
By law every motorist has to have motor insurance and, if you are involved in a major accident, the costs of compensation and repairs could amount to many thousands of pounds. As long as you were not driving under the influence of alcohol or drugs, or in any other way that invalidates your insurance, your policy will cover you after you've paid your excess – giving you peace of mind that your potential financial losses are limited.
You win some, you lose some
Be aware that when your insurer pays out, there is also likely to be a cost for you, somewhere along the line.
- Excess: You will still have to pay your policy excess. This will include a compulsory excess, and a voluntary excess at a level that you signed up for when you took out the policy. The higher your voluntary excess, the lower your premium, because your own contribution will be higher each time you claim, reducing the insurer's pay out. There's no point in making a claim with a value that is lower than your total excess, and even when it is more than the excess you need to weigh up the pros and cons...
- No-claims: You lose your no-claims discount if you make a claim. With some insurers allowing you to build up a no-claims bonus that reduces your premium by as much as 70%, it would be silly to throw this away for a small claim. For example, if you make a claim worth £700 for an accident, and your total excess is £500, in the end you'll receive £200 towards the cost of repairs. Gaining £200 now may well leave you worse off in the long run if you lose your no-claims.
- Rising premium: Even if you don't have any no-claims, once you make a claim your policy premium is likely to increase at renewal time. Statistics indicate that people who have claimed before are more likely to claim again in the future, making them 'high risk'. Unfortunately, this holds true even if you've only claimed for a no-fault accident.
No claims discount protection
You can pay extra to protect your no-claims discount, usually allowing you to make one or two claims within a set period without losing your no-claims. You may notice, however, that your premium still goes up a bit the next year. This is because most insurers consider drivers' claims history when they calculate their premium. The way in which premiums are calculated is pretty complex, but as a general rule protection is worth it – but doesn't protect you completely from your premium rising.
