When you still believe in the tooth fairy and the probability Santa will deliver something you had on your list come Christmas, you guard the feeling life is usually fair. It’s only when you enter the foothills of old age around seven or eight that you learn the hard way about all the pitfalls standing between you and justice. As an adult buying your first insurance policy, there’s one particularly hopeful myth. It says, simply, that if you’re not at fault and your insurance company does not have to pay out on a claim, your premium will not shoot up when it comes around for renewal. As an example, you leave you car safely in the garage while you jet off for a little R&R. When you return, you discover that during a deluge of Biblical proportions, your garage was demolished and your beloved car swept away in a flash flood. You decide to sell the rusting wreckage for salvage and buy another heap. Why not trouble the insurer? Well, your third party, fire and theft policy is not really relevant to this situation so there’s no claim to be made.
Even though there’s no claim to be made, you have to notify the insurer your car is gone. A new cheap car insurance policy will be required for the replacement. At this point you discover many insurers increase the premium rate even though the company has not suffered a loss. The explanation is one of these statistical quirks. It seems being involved in a no-fault situation is often followed by a claim in the next two years. The same thing will happen if you’re involved in an accident and you recover all your losses from the other party. This is not fair but it’s the way many insurers manage their policies. Whoever thought the no-claims discount was gold-plated is still there with that old belief in the tooth fairy. So to protect yourself, you should always shop around for the lowest annual premium rates. To get your business, one of the other insurers will offer you cheap car insurance. All you have to do is give up the thought of loyalty and go where the premium rate is lower.