The car insurance market has been the target of claims abuse and fraudulent claims. To protect the business from fraudsters and abusers alike, most insurance policies factor in a policy holder’s insurance history and the frequency that the policy holder files a claim to effectively appraise an insurance policy.
A policy holder’s insurance history reveals a lot about a person’s tendency to make claims. It serves as an insight into a person’s propensity for getting involved in accidents, breaking the traffic law, consistency in making insurance payments, and so on. A person’s insurance history enables insurance companies to assess the financial value of a person’s insurance premium through calculated risks. Policy holders with a history of breaking traffic law, accidents, and missed payments will get a more expensive insurance policy than those who have kept their records clean. In contrast, people who have a pristine driving record may enjoy discounts or lower rates due to their low-risk nature.
People who have a record of making claims for insignificant damages may also be labelled as high-risk by insurance companies . Although it would be well in their rights as an insured party to make a claim as long as it is covered, it would also let insurers know that such a person would be more of a liability than an asset.
By calculating the risks when making an insurance quote , insurers promote the idea that making a claim needs to be a rational decision. An insurance policy is sold to lessen the risks for the insured party, and to generate income for the insurers. The idea is simple: Insurers would charge high-risk parties more to compensate their losses in the likely event that the high-risk parties would make a claim. Most insurance policies now have a no-claim bonus that allows policy holders to enjoy discounted rates for the succeeding year of coverage. By implementing a no-claim bonus, the insurers shift the burden of risk to the insured party.
How can you save money on your insurance policies?
Aside from having a pristine insurance record, you can save on your insurance policies by making a calculated decision when you make an insurance claim. For example, insignificant damage like dents and scratches can be fixed by going to a local body shop or an aftermarket shop. Going through this route will require you to dish out some cash, but considering the effect that making a claim would do to your insurance policy, you would be better off paying for the repairs out of pocket. You can save your insurance claims for more significant claims like major repairs or total wreck. You can also save on your insurance premiums by getting a higher excess. The excess would also shift some of the risk to you, but it would shave some expenses off of your premiums.
When making a claim, always consider the repercussions of making a claim in the long run. Paying for some minor repairs out-of-pocket may cost you, but making a claim would leave a permanent mark on your record that may increase your insurance premiums to a point that it’s worth more than what you have actually paid for if you have paid for the repairs yourself.