Understanding How Car Insurance Works After an Accident

No matter how good of a driver you are, there are times when an accident can occur due to unforeseeable reasons - whether due to the fault of a third party or any other reason. While you can certainly minimise the chances of such accidents with safe driving and following traffic rules, it is important to be financially prepared for such situations. For this, securing a car insurance plan is essential.  ...read more

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Car insurance covers the costs of accidental damages that your vehicle incurs, with the coverage scope depending on the insurance type. In the UAE, the claim process is fairly straightforward. The insurance company will conduct a thorough inspection of the damages incurred and reimburse you accordingly.

However, this doesn’t end here - when you file a claim, it can affect your car insurance premium at the time of renewal. If you frequently file claims, premium loading can also take place. Thus, it is important to understand how much insurance premium rates can go up post-accident and how an accident affects car insurance.

Do Accidents Affect Your Car Insurance?

Let’s see the effects of accidents on your car insurance -

1. On the Premium

Accidents impact your car insurance premium only when you file a claim. Car insurance providers offer financial cover for your car against several risks for a premium. A higher insurance premium implies that your car has been involved in an accident. So if you make an accident claim, you will be regarded as a potentially risky customer. In this case, the insurance provider will charge a higher premium at the time of the car insurance plan renewal.

2. On the Coverage

Continuing along the previous point, if you have a history of filing claims repeatedly, it would impact your car insurance coverage as well. Several providers reduce the policy coverage and see you as a risky car owner if you make many claims. In such a case, even the add-on covers offered are minimum. In some situations, the insurer only offers third-party insurance instead of a comprehensive car insurance plan

Note - If you do not file a car insurance claim upon the accident and get the car repaired out of pocket, there is a possibility that the insurance premium and coverage will not get affected upon premium renewal. However, it is only possible if your car was not inspected for repair work at the time of insurance renewal. 

Reasons Your Car Insurance Premium Increases After a Car Accident Claim

Given below are the major reasons for an increase in your car insurance premium rate once you make an accident claim -

  • Regular Claims - You will be subjected to what is called premium loading if you file claims regularly. The loading percentage is based on several factors including the claim type, Insured Declared Value (IDV), the amount paid as claim settlement, and the condition of the vehicle. 
  • Losing No Claim Bonus - If you file a claim, you forfeit the No Claim Bonus, which is a discount on policy renewal. This discount is given if you don’t make any claims during the policy tenure. If no claims are filed for, say, the next five years, this incentive or discount will increase. Keep in mind that as the annual calculation for long-term and short-term plans may differ, it is advisable to read the relevant policy wordings to learn more about this.

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This can be explained with the following example -

If you were qualified for a 10% No Claim Bonus at the time of renewal (before making a claim), you will not get that if you make a claim (and if it is settled). As a result, you will pay a greater premium than you would have if you hadn't filed a claim and got your No Claim Bonus.

What Factors Affect the Insurance Premium After an Accident?

Listed below are the primary factors that influence the insurance premium after an accident -

  • The seriousness of the incident
  • Who was accountable
  • Your complete driving record
  • Prudent driving

So if you have a minor collision that was not your mistake and you have a spotless driving record free of speeding violations, your insurance price may not go up by much.

Had a Car Accident - What Next?

How Much is the Car Insurance Impacted After an Accident?

As insurance companies take several considerations into account, it’s not necessary that insurance premiums will always increase. Compared to several other nations, the insurance sector in the UAE is quite flexible and inclined towards offering financial security. Due to the absence of mandated premium loading in the UAE, your premium may not necessarily increase as a result of a single accident.

However, if multiple claims are made, the chances are that the insurance premium will be loaded. The percentage of the premium loading will depend on factors like the car’s condition, driver’s history, type of vehicle and its features, and more.

How to Lower the Car Insurance Premium Despite Damage to Your Car?

Discussed below are a few ways to lower your car insurance premium rate despite the damage your car incurred -

  • Avoid Filing Claim - You can skip filing a claim and get your car fixed by yourself if the claim is of modest value. You can prevent any loading this way and maintain your No Claim Bonus as well.
  • Voluntary Deductible - When renewing your auto insurance, you have the choice to raise the voluntary deductible. This indicates that you are ready to contribute financially to any repairs made to the insured vehicle. Consequently,  the insurer will settle claims for a significantly smaller sum. If you choose a higher deductible, the premium for the vehicle will be lower than usual. With that said, if you are willing to shoulder a significant portion of the burden associated with car damage, you should exercise caution when selecting a voluntary deductible as it goes against the intent of insurance.
  • No Claim Bonus Cover - You can buy a No Claim Bonus Protect rider to allow you to file a claim while still preserving the perks of a No Claim Bonus. In most cases, you are free to submit one or two claims each year with this add-on and maintain the No Claim Bonus. Note that purchasing this add-on will cost you more money.
  • Anti-Theft Device - A decrease in car insurance rates may result from the installation of an anti-theft device. Car insurance claims may increase your premium, but adding a theft-prevention device can help to moderate the cost.
  • Update the Coverage Choices - You may think about modifying your coverage selections if you really want to reduce your insurance rate. However, while you can reduce the amount of coverage you have, you must usually discuss these adjustments with an authorised representative which can actually lower the rate.
  • Opt for a Different Car - While insurance companies evaluate every make and model of the car separately, the general rule is that luxury vehicles cost more to insure. It all boils down to things like materials, repair costs, and safety records. 

So if you need to lower the price of your car insurance plan, you can also consider purchasing any of the inexpensive-to-insure vehicles.

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Key Takeaways

  • Accidents affect your auto insurance premium only after you submit a claim. 
  • For a fee (premium), auto insurance companies offer financial protection for your vehicle against a variety of dangers. A higher insurance rate suggests that your vehicle has been in a collision.
  • If you have a pattern of submitting claims, it will also affect your auto insurance coverage. Many insurance companies cut your policy's coverage and consider you a risky car owner. Even the optional add-on coverings are minimal in such a case.
  • If you frequently file claims, you can be exposed to premium loading.
  • Factors influencing the car insurance premium after an accident are the intensity of the accident, your driving record, who was accountable for the incident, and more.
  • You can easily reduce the car insurance premium even after an accident if you pay for the repair costs out of pocket, opt for the No Claim Bonus Protect rider, install an anti-theft device in the car, and update the coverage option.
How to Claim Insurance for Car Accident in Dubai

FAQ's

Q1. Can a small and single claim result in premium loading?

Ans: Premium loading takes place when the claim frequency is high. Thus, a single claim of a low amount does not affect the premium loading.

Q2. Can you opt for No Claim Bonus Protect rider if you have submitted a claim during the previous policy tenure?

Ans: A No Claim Bonus Protect rider is only effective for the next year. Even if you filed a claim during the preceding policy period, it will not affect the subsequent No Claim Bonus.

Q3. Does increase in insurance premium rate affect the credit score?

Ans: No, an increase in your insurance rates will not lower your credit score. However, depending on where you reside, your credit score may have an effect on the amount you pay for vehicle insurance or make it more challenging for you to get the best deals.

Q4. Can you switch car insurance after an accident?

Ans: Yes, you can change your auto insurance if you can find a more suitable provider as per your requirements.

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