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Should You Pay for Accident Damages or Claim Your Car Insurance?

Should you fork out your own cash to pay for minor damages to your car after an accident – even if you have an existing car insurance plan? If you are thinking, “Why on earth would I pay for repairs out-of-pocket, when I have an insurance policy?”

Do I have to file a car insurance claim after an accident?

Well, you’ll be surprised to know that there are a couple of compelling reasons why it would make sense to do so.

When to claim your insurance (and not pay out of your own pocket)

Now you know when you should possibly hold off on making a claim, here are some instances where you should probably file one if accidents occur:

1. When it’s not your fault

When an accident occurs without it being your fault, you can make a claim to cover damages as it should not affect your NCD rate. On the other hand, if it isn’t clear whose fault it is, you still might want to make a claim or report the incident to your insurance company.

This is because most comprehensive insurance plans may include benefits for a liability defense. So if you are sued in court, your insurance plan can help you cover some of your litigation fees. If you do not file a claim or at the very least, report the incident, you may not get this benefit.

Here’s an important reminder: When an accident occurs, do not admit to a fault – most car insurance plans may include this instruction in your contract – so be sure to adhere to it.

2. When it does not affect your NCD

There are claims you can make that will not affect your discount rate and this usually extends to add-ons. For instance, if you have a windscreen damage add-on and your windscreen cracks by accident, claiming for a replacement or repair should not affect your NCD.

Also, if you’ve been involved in an accident that was not your fault, you can make a claim without it affecting your NCD.

3. When you can’t afford to cover the repairs

You should file a claim if the repairs are just too costly or if you don’t have the money to pay for it, after all – that is what insurance is for. Make sure to report the damage or incident immediately at a police station and with your insurance company.

Don’t unnecessarily delay making a report or notifying your insurance company as your claims could be rejected otherwise.

4. If someone gets injured

There’s no telling the extent of injuries or medical costs that might come off an accident – so you’ll be wise to file a claim or report the incident when someone gets hurt. Failing to do so could leave you liable to cover medical expenses as well as repair costs, which can be significant.

As mentioned above, most comprehensive plans will also provide a benefit for litigations that involve third party liabilities (if no other exclusions apply). For this reason as well, it’s a good idea report the incident.

Also, it should go without saying that you’ll need to report any claimable incident, if required by your insurance plan.

Do you know what types of insurance claims you can make?

General damages

General damages come into consideration for losses that are less tangible in nature. For example, you may be able to put a price on a broken headlamp, but it’s more difficult to quantify loss of amenities, or even the loss of future earnings.

If you are covered for personal accident insurance, you will be eligible for compensation arising from pain and suffering experienced as a result of the accident; keep in mind that this includes both physical pain and emotional suffering.

PA cover or drivers and passengers personal accident cover will ensure that you and your passengers who were hurt in the mishap will be entitled to claim medical expenses or even a sum in the very unfortunate event of an accidental death.

Special damages

Examples of special damages are those incurred by hospital bills, loss of personal items and effects, and even transportation expenses due to the accident. They deal with clear monetary expenses – as opposed to general damages.

There are accidents where the victim might suffer more than physical injury or a damaged vehicle. For instance, computer equipment that was stored in the boot compartment of a car could be damaged if one’s vehicle was rear-ended; the victim can make a special damages insurance claim for said computer equipment.

Likewise, medical expenses is another common claim for special damages. It is wholly acceptable that an accident victim would need to seek medical attention or even hospitalisation and this subsequently falls under special damages claim. Of course, do check with the insurer if there is a cap on how much treatment you may be subsidised for.

Before you worry about making a claim yet, why don’t you take a minute to check if your car’s insurance policy has expired. And if it’s expiring in less than 60 days from today, the Bear strongly thinks you should start the renewal process now.

When you should consider paying for repairs by yourself (or not to file an insurance claim)

If the damage is not severe and you have not caused injury to other people or destroyed their property (as a result of the accident), you might be better off paying for minor damages yourself.

You can save your discount and at the same time avoid the hassle of having filed a claim. Although it isn’t a tedious process to file one – why waste your time and potentially, your NCD?

1. To maintain your No-Claim Discount

In Malaysia, a No-Claim Discount or NCD is a discount given to drivers who have not made a claim on their policy (or only made ones that do not affect the NCD; more on this below). The discount rate starts at 0% in the first year of car ownership and reaches a maximum of 55% from the sixth year onwards.

If you make a claim that affects your NCD i.e. damages from an accident for which you were at fault, the discount for your premiums for the following year will revert to 0% and you’ll have to rebuild the discount all over again.

Thus, if the cost to repair is lower than the discount rate for the following year, you may want to consider covering the expense yourself.

Here’s a simple real-life example:

Let’s say you drive an older-generation Myvi and your car insurance premium stands at RM800. If your NCD rate is 45%, your NCD would be worth RM360. In the following year, your car insurance premium will cost RM440.

Hence, if you were involved in an accident which requires you to pony up an estimated RM500, it may not be worth sacrificing your NCD to pay for the damages incurred. After all, your NCD rate will return to 0% the following year.

Similarly, if the damage sustained by the other vehicle is minimal and you are not experiencing a cashflow issue, it might be advisable to pay it off on your own.

2. To maintain a low-risk profile

Beginning 2017, car insurance premiums were liberalised. What this means is that policy premium prices are no longer being controlled by the government. Instead, premiums will be based on market prices and insurance companies are free to set the rates for new products.

But how are insurance companies charging? One way is by looking at driver risk profiles. The factors that determine riskiness range from age, gender, previous claims, experience level and others, as determined by respective insurance providers. The higher risk you pose for getting into an accident or having your car stolen, the higher the premium.

What’s the final word?

No one likes to be involved in an accident – duhh!

You’ll need to deal with the potential hassle, injuries sustained, and even the possible increase in car insurance premiums as a result of the unfortunate incident.

Here’s a little Finder advice: Always make a police report on the incident, so that the other party will not be able to provide another version of events to twist the truth. Just as importantly, do not disclose details of the accident with anyone else except for our friendly folks at PDRM or your insurance company.

In the meantime, come on and check out our piece on car insurance detariffication.

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