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Does making a third-party claim increase your car insurance premium?

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Published on February 10, 2022. EST READ TIME: 3 minutes

A third-party car insurance claim can be of two types – one where your insurance is being invoked, if you are the driver at fault for the accident. Or you can invoke the other person’s third-party insurance, if they are at fault for causing the accident. The insurance policy of the at-fault driver is responsible for the compensation and it is the policyholder’s car insurance that is affected – in most cases. To understand this better, read on.

What happens in the aftermath of an accident?

It is recommended to inform your respective insurers about the accident immediately, irrespective of who’s to blame for causing it. Ensure you let the insurer know that it is a purely informative intimation and not the filing of a claim, if you’re not at fault. This will be helpful down the line if the inspection of your vehicle is required during the renewal of your policy. Also, file a FIR with the police and obtain a charge sheet. The charge sheet is necessary for registering your claim with the Motor Accident Claims Tribunal, a special court responsible for all accident-related claims.

How do you get in touch with the insurer?

Call the tollfree number of your insurer or call your insurance agent to get through to them immediately. Otherwise, you can also write a letter by post or an e-mail, mentioning the details of your policy and the accident.

What happens to your insurance policy on making a third-party claim?

Let’s take an example of person A, whose car has been damaged by person B. Now, if A has only a third-party car insurance policy, then he needs to file a FIR and register his case with the Tribunal as mentioned above. If A has a comprehensive insurance policy, he can also file a claim with his insurer under the own damage cover component. But then, he will lose his accrued No Claims Bonus (NCB) discount and his insurance premium will probably become more expensive for the following years.

This is because the insurer is liable to compensate A for their damages and perceives A to be of higher risk when it comes to getting involved in an accident. If A has an accident history, their insurance premium will most likely go up. However, if A has a third-party car insurance only, the premium is not going to be affected, as it is fixed by the IRDAI and not the insurer.

Take a look at the situation from B’s perspective

If B is at fault and does not wish to contest the decision, they can call their insurer and inform them of the accident. A will then file a claim with B’s insurer and the case can proceed uncontested. A will be compensated by B’s policy as per the Tribunal’s decision and B will lose the accrued NCB discount. It will also increase B’s insurance cost at the time of renewal, with the accident on their record.

However, moving the Tribunal is a complex and time-consuming process and is usually done only in case of injury or death. In case of vehicle-damage only, it is generally recommended to use one’s own insurance to help pay for the damage incurred and swiftly resolve the matter, as opposed to jumping through legal hoops to get a decision that may or may not be in your favour.

Conclusion

As for what happens to your insurance policy, the insurer that ends up paying for the damages has the prerogative of increasing the cost of insurance for the at-fault policyholder. Even if the victim’s insurer pays for the own damage component of the policy, the victim, unfortunately, suffers a loss in NCB discount and a possible rise in insurance cost.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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