Where Is the Premium Value Allocated When You Don’t Make an Insurance Claim?

I have been driving for 5 years and haven’t made any claims. It feels like I am paying for someone else’s insurance. Where is the value allocated? 

It does seem like it, doesn’t it? You have been paying the premiums for your insurance policy for quite some time and one day, you wonder: where is that entire premium going to?

Well, the thing is: every insurance policy has different rules. A life insurance policy gives you case value for no claims. A small amount of your monthly premium payments goes into another account that earns interest and keeps growing until it reaches the coverage amount.

When it comes to auto insurance, the rules are different. To be honest, there is no cash value. There… we said it. In order to understand what kind of value you get, you need to understand the claim process first.

 

What Is a Claim?

A claim is the process of notifying your insurance agent that you have been in accident and want physical and medical assistance. The insurance agent the reviews your policy and offers a sum that is called the payout.

 

The Claim Process

When it comes to filing a claim, you need to gather certain documents that act as proof. For example: you were in an accident where a driver hit you from the wrong side of the road. The car was damaged pretty badly and the other driver tried to flee the scene. Thankfully, there were some passersby who saw the whole accident and agreed to give testimony. You weren’t injured much in the accident, so you decided to collect proof that you weren’t at fault. You took pictures of your car and the other driver’s car, you asked the witnesses closest to the accident for their number, and then gave your account of the accident to the police when they arrived. 

Before filing for the claim form, look at the Product Disclosure Statement (PDS) to find out if your claim is valid or not. You need to inform your insurance agent about the accident as soon as possible. Insurance agencies have varying “informing time period”. The standard time period is usually 5 to 10 days. The insurance agency informs you in 10 working days whether your claim is rejected or approved. If the claim gets approved, you will know its progress in the next 10 days. In case the insurance is denied during the next 10 days due to some missing documents, you will be notified immediately so that he problem can be rectified.

Now, let’s come back to the premium value you get when no claim is filed:

Let’s assume that you have been paying your premiums regularly for 5 years now. During this time, you haven’t had a single accident and no claims have been made. You are thinking about canceling your policy because it feels like that your money isn’t going anywhere. You don’t see any benefits coming your way, which is making you question your decision. 

We understand your concern and yes, it is valid. However, picture this:

After 5 years of maintaining your insurance cover, you decide to cancel it. A few months later, you get into an accident that destroys your brand new car and the driver’s car. On top of this, you rack up a huge medical bills that includes payments for your and the other party’s injuries. It’s a costly mess that amounts to millions of dollars. However, since you have no insurance policy, you end up covering every penny out of your pocket.

Are you prepared to go bankrupt? It will happen if you cancel your insurance policy. Sure, you haven’t been in an accident for 5 years but in this amount of time, your coverage has grown, which means you will receive a large payout incase the accident you are in turns out to be huge. 

 

No-Claim Bonus (NCB)

Here’s the good apart of not making a claim in 5 years: a no-claim bonus! Yes, you heard it right… don’t make a claim for 5 or more years and you will earn a bonus. Some insurance agencies provide this bonus after 10 months and some after a couple of years. We do suggest that you don’t include this feature in your list when choosing an insurance agency. 

What is a No-Claim Bonus?

So what exactly do you get in the bonus? The answer: discount on your premium. It’s pretty simple: you don’t make a claim for a certain period of time and you get to lower your premium payment and maintain your coverage with the same benefits. In case you are wondering, there’s no catch.

Let’s assume you were in an accident. The car that hit you was coming down a one-way road with the headlight off and drunk. He hit your car head on, which resulted in the car spiraling out of control and hitting a tree. The scenario clearly explains that you were not at fault, which gives you an advantage. You don’t need to file for a claim. Inform your insurance agent about the accident and explain everything in great detail. The police report will provide proof that who caused the accident. 

In such a case, the other driver will pay for your car repairs and you will be able to save your NCB. For this to work, you need to make sure that the evidence you provide proves with a doubt that you were not at fault.

And this is why you need to keep paying your premiums even if you haven’t made a claim in five years. In the future, if you do get into an accident, you will be able to protect your savings and depend wholly on the insurance payout.

If you are looking for a qualified insurance agent who holds years of experience in this field, then visit Pawson. The company provides different types of insurance policies for homes and businesses. To know more about their policies, contact them at 203-481-8898.