Car insurance: Is claiming always a good idea?
Can claiming on your car insurance be a false economy? In some cases the answer appears to be yes.
If you clipped your wing mirror while reversing into your garage, for example, it would be unlikely to make much financial sense to claim on your motor cover.
Firstly, there’s the cost of the excess on your policy, which could be anything from the first £100 to £500 of the claim.
Then there’s the loss of any no-claims bonus you have built up, which means your premium when you come to renew your insurance will be higher – and will remain higher for a number of years.
Even if you don’t have any no-claims bonus, the fact you’ve made a claim will also increase the price of cover in future.
No fault doesn’t mean no cost
But even if your car is damaged by another motorist, you can still lose out by making a claim against them – even if they admit liability and allow your insurer to claw back any repair costs from their policy.
As a recent campaign by Labour’s shadow transport minister John Woodcock has highlighted, blameless motorists can still face premium increases simply because they’ve been involved in an accident.
If you have caused an accident, your premiums will rise in future, not just through the loss of no-claims bonus, but because your insurer now thinks you represent a higher risk.
But there can often be similar consequences for innocent motorists.
Insurers’ statistics show that people who have been involved in accidents, even when not at fault, go on to make more claims than those who haven’t.
So although the innocent have no excess to pay and will not lose their no-claims bonus, their premiums could still rise in future.
Accidents ‘may be ignored’
Ian Crowder at the AA says: "It is true that you may find that a collision that isn't your fault leads to an insurance premium increase: in fact, it almost certainly will.
"That's because statistically, people who have had no-fault collisions are more likely to have a fault collision.
"Indeed, your driving behaviour may result in a crash that may be deemed not to be your fault: for example, sudden and unnecessarily sharp braking may lead a following car to run into you, yet this will inevitably be assessed as the following driver's fault."
Calculate the impact
So if the damage to your car is relatively minor – just a few hundred pounds, for example – you might be better off not claiming at all, instead paying for any repairs out of your own pocket.
Will Thomas, motor insurance expert at Confused.com, says that drivers should do their sums when considering making a low-value claim, whether they are at fault or not. "It is quite straightforward to work out what the impact of a claim on your future premiums could be.
"Just use a comparison site to see how much the cost of cover changes based on having no claims compared with having a no-fault claim of a particular value."
Thomas adds that the impact of the claim can last for three or four years – so if the cost of cover looks like it might increase by £100 when you come to renewal, you should multiply this to get an overall figure.
Young drivers hit hardest
Emma Banks at LV= says that the driver’s own circumstances play a big part in deciding whether to claim or not.
"If you smack into your garage wall or any other inanimate object, it will really depend on how much damage you have done, and how much it will cost to sort out," she says.
"So for example, for an older Jaguar driver, who is paying a relatively low premium, it is probably worth making a claim as the cost of repairs will be significant.
"But if you are a young driver with an old banger, a limited no-claims discount and a higher premium, if it's just the bumper that needs replacing then it is probably worth getting a second-hand one and replacing it that way."
The legal position
One problem with a DIY approach to dealing with repairs is the small print on most insurance policies: providers generally say that customers should report any and all accidents, whether they want to make a claim or not.
If you fail to come clean about an accident and the insurer finds out, it could cancel your policy or refuse to pay out on a subsequent claim.
But even if you aren’t claiming, your premiums may still increase in future because you have been involved in an accident – albeit one that didn’t leave the insurer out of pocket.
Crowder at the AA says: "Strictly speaking, you should declare all events, whether you claim or not, to your insurer. The reason is that damage might have compromised safety in some way.
"When cars are repaired by insurers, they want to know that the repair is done well and with the proper new parts to help ensure that the car repair is as good as it was before an accident and fully meets the manufacturer's specification."
Crowder adds: "As a broker, the AA could not condone withholding disclosure of any collisions, dents, or scrapes.
"But we certainly recognise that thousands of such events are never reported to insurers; and we also recognise that people may come to a private arrangement to meet damage costs in a minor crunch and not report it to their respective insurers.
"That is, after all, a matter of conscience."
More sophistication needed
Crowder says: "Some insurers are more sophisticated than others in their analysis of claims and may be more likely to increase a premium for some types of no-fault collision than others, or may choose to ignore some minor events."
The different approaches of insurers to no-fault claims again highlights how some drivers could benefit from a more accurate assessment of their ability – something that the new breed of telematics policies offers.
This type of car insurance uses in-car technology to monitor each driver’s performance behind the wheel and set premiums accordingly.
This means that, instead of paying insurance rates based on industry expectations of drivers in a particular age group, for example, individuals are charged more fairly.
If telematics deals became more widespread, insurers may be less likely to rely on other factors – such as whether a customer has been involved in an accident, even though they were not at fault – when setting premiums.
Claiming with car finance
If your car is on finance or leased, allowances are usually made for wear and tear including some scratches. It’s always worth checking your agreement for what is included.
If it’s something small like a scratch or bump you might choose not to tell your insurer. If it’s something bigger, you’re best to get the repair work done rather than wait to the end of your finance deal.
When the time comes to hand the car back to the dealer or lease company, the car will go through an inspection. If there’s damage to the car, that can affect its value and any final payments.
If you’re in an accident that makes your car a total write-off, you will need to let the insurer know as it’s more than a minor repair job. With something like gap insurance in place you can at least make sure you’re covered against any depreciation in the car’s value.