Car insurance premium mathematics

Reduce my car insurance premiums

No claims bonuses for car insurance can be more important than you initially thought:

Have you ever had an accident and it wasn't your fault?

Apologies for sounding like a no win no fee claims advert but the question still stands. If someone else caused you to have an accident, even if their insurance fully paid out you may have noticed that your own car insurance premiums have increased.

This doesn't seem fair however it is the way that the insurance market is set up.

Remember that it's a no claim bonus and not a no blame bonus. As such, even telling your insurers about an accident that someone else's insurance Company is willing to fully pay for can invalidate your no claims status. It doesn't matter whether the accident was a result of your fault or not. The result will likely be that when you come to renew your insurance you will likely find that your premiums have gone up.

What can I do about my car insurance premiums?

The obvious answer is that you can shop around. Use comparison websites and get a better quote if you're not happy with the increased premiums. Some insurers will not penalise you by as much if the accident was settled by another insurance Company.

Accept cash payment - you could consider suggesting to the person who caused the accident (assuming that they're happy to accept the blame) to pay out for the damage rather than go through insurance Companies. This is risky though as if you don't end up reporting the accident to your insurer and further down the line the person proves to be a difficult payer then you will have little recourse or help from your insurer later down the line.

Finally, make sure that you've done the maths. Let us say that pre accident your insurance premiums are £400 per year. You have an accident and it isn't your fault and cost for repair is £300. You can check with your insurance Company prior to reporting an accident what your premiums are likely to go up to. Consider that it is possible for your insurance premiums to go up by let's say £200. In total you will likely be paying £600 per year for car insurance due to losing your no claims discount. This will mean that in two years you'll end up paying to your insurance Company and additional £400 in insurance premiums. This is even more than the £300 of damage! Needless to say there are scenarios where is it more beneficial in the long run to pay to repair the damage yourself rather than go through your insurance Company. The no claims bonus is actually quite an asset over the long run - think about treasuring it as such.

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