Known when to claim and when not to claim

Your legal obligation is to ensure that you are covered for damage that you are deemed responsible for to others - and as such, the most fundamental of policies offers you no cover against damage to your own vehicle.

The next step up is third party, fire and theft - essentially the same as third party but with additional cover if your vehicle is set on fire or stolen. If you are concerned about the value that you have invested into your car or any possession in the car, then this policy will not cover you to the degree that you require.

Most people opt for a fully comprehensive cover - this covers third party, fire and theft as well as damage to your car (whether its caused by you or someone else) and the damage, loss or theft of any possessions carried in your car.

The first step to consider when making any kind of claim on your car insurance is what's covered? Not only does the type of policy dictate the nature of your claim but also the specific details of the policy.

One example that you need to think about is whether or not your insurance would cover you for replacement locks? Can you claim for personal possessions and if so what items are covered and to what value?

It's worth noting that many people these days have home contents insurance which covers items carried in your car - check the difference in policy to see which insurance policy is more cost effective to claim with.

You should consider two key factors when deciding whether to claim or not to claim - these two factors are the impact on your no-claims bonus and the amount of excess charge that you will be liable for.

- Excess

The excess charge is how much you are willing to pay in the event of an accident. Your insurance provider may set a compulsory excess charge or the excess charge may be voluntary - whichever the case, the golden rule is the more excess you are willing to pay the lower your premium.

The excess charge can be a major deciding factor in whether to make a claim or not.

For example, if you agree to paying an excess of 200 that means that if you have an accident that costs 400 to repair your vehicle, you pay 200 and the insurance company pays 200. If your claim is less than 200 then the insurance company will not pay anything.

So, as long as the claim is more than the excess you should make a claim, right?

Not necessarily - that brings us on to our next major factor:

- No claims bonus

To some people the thought of losing their no-claims bonus is the stuff of nightmares. It's no surprise - some no claims bonus policies can save you 65% on your premium if you have five years or more of no claims.

The particular details of your no-claims bonus vary from policy to policy - with some there is no quarter: if you make a claim, you lose your bonus. With others there is a system of "three strikes and you're out" whereby you are allowed to make two claims within a certain time period but a third would result in your losing your bonus.

There are also protected no claims bonus policies where you can pay an extra premium to protect your no claims bonus so even if you have to make a claim you save money.

While not rocket science, considerable thought needs to be applied to the decision of whether or not to claim. To make the right decision you need to weigh up, not just the cost of the claim but the effect that claim will have on your premium.