Should you make an insurance claim?

Last updated: May 2nd, 2013
Feature by Esther Shaw

Whether you prang your car yourself, or return to a carpark to find a broken wing mirror, your first thought might naturally be "it's ok, I've got insurance". But claiming on your car insurance is not necessarily the right course of action.

First of all, you need to think about the likelihood of your claim being successful, which will depend on the terms and conditions of your policy. This is something you should carefully consider when taking the policy out.

For example, third party car insurance will only cover you for the damage done to another vehicle or its driver, but not for damage or theft of your own; third party, fire and theft will cover you for the above, plus the loss or damage of your car through fire or theft; and fully comprehensive insurance will cover you for accidental damage to your own car in addition to the instances above.

The type of policy you have is not the only distinction to make, according to the British Insurance Brokers' Association, one in three drivers aren't covered for instances of accidentally misfuelling, for example.

Cover for driving other cars than your own is also not a standard policy feature, and it's worth remembering that if it is part of your policy, you usually only get third party cover.

What about your excess?

As a general rule, even if you make claims of as little as £500 on your car insurance, the chances are that at renewal, you'll have to pay a higher premium for the following year's insurance. But there are number of other factors to consider.

"First off, you need to think about your excess," says Nick Dear, spokesperson for insurer More Th>n.

"If this is higher than the value of your claim, you should aim to settle the cost without using your insurance, as it will be cheaper. But you also need to consider your no-claims bonus."

Research from price comparison website confused.com shows the likelihood of claiming on car insurance is dependent on age, with over-55s much more likely to claim if the cost of the accident is greater than the excess – and 65% of them saying they would do so.

However, it found that younger drivers aged 18 to 24 who already face rocketing premiums often shy away from claiming for fear of losing their no-claims discount.

No claims bonus

"A no-claims bonus is proof of a good driving record when it comes to calculating the driver's risk and can mean a discount of up to 60% with some insurers," says Will Thomas, head of motor insurance at confused.com.

However, the discount differs from provider to provider, and making a claim will have different repercussions depending on your insurer. 

Insurance companies operate on claims margins, which is the difference between the premiums generated and the amount paid out to settle claims.

To maintain its margin, an insurer may raise premiums if policyholders make too many claims or too many of the wrong sort of claims.

The key is to do your sums. "This will help you decide whether it's worth making a relatively low-value claim," says Simon Douglas, director of insurance at the AA. 

"This needs to take into account not only the excess, but also the amount you will be paying in extra premiums before your no-claims bonus is fully restored."

In some insurance policies, no-claims bonuses can be protected. Car insurance companies will offer this protection to people with a careful driving record and four or more claim free years to allow them to make a claim without losing their bonus.

Again, the definition of 'protected no-claims' will vary from provider to provider so it's important to check what each insurer's terms and conditions are.

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