Bonuses for Car Insurance: The Bonus-Malus System

Bonuses for Car Insurance: The Bonus-Malus System

Did you know that one of the most effective commercial tools insurers use to build customer loyalty is Car Insurance bonuses? We are talking about the bonus-malus system with which you can enjoy discounts if you have not registered claims for a long time or given reports to your insurer. Do you know how insurance bonuses work? Today we tell you how the insurance bonus is applied and how you can take advantage of it to pay less to insure the car.

The policy bonuses not only allow you to save a little money when insuring the car: they also help us all drive better. And it works for the company because it helps build customer loyalty.

But it goes even further because it is possible to customize the risk by applying the bonus-malus. In other words, the insurer can reward you for being a good driver and charge more to those who have more claims at the end of the year.

But how do car insurance discounts work? Now we will explain it to you.

How do car insurance discounts work?

Car insurance discounts work according to a bonus-malus system with which discounts are granted on the renewal of vehicles’ policy that has a lower accident rate.

Based on an insurance price, the bonus will be assigned to good drivers and the penalty to those who are not so good, in which case penalties may be applied to the base rate to be paid.

That means that the insurer, when it seems that you have not given parts in a certain period (which can be one, two, three, or five years, depending on the insurer), applies a discount to the price of your insurance at the time of the renovation.

And if claims accumulate in that same period, you may find that the insurer points you a surcharge in the payment of the renewal of the policy.

Insurers apply discounts differently, with different discount percentages and with longer or shorter terms without parts.

Some insurers have a progressive system of discounts, with which as the years go by without having a claim, the discount increases.

For example, it may happen that, for each year that passes without us giving a part, the policy costs us 5%. If we add years without details, the discount percentage can increase, and some companies reward their best drivers with a discount of up to 60% on the price of insurance.

Depending on the company, there is always a maximum limit on bonuses that is usually between 40% and 60%.

You can also find car insurance. Different bonuses are applied depending on the coverage contracted, with discounts of a greater or lesser amount depending on whether the policy corresponds to a Third Party insurance, an Extended Third Party insurance, or an All Risk.

Advantages of the car insurance bonus system

This car insurance bonus system has turned out to be a good idea that offers attractive advantages, both for customers and insurers.

Reduction in the price of the policy

The advantage for customers is clear. If you are a driver who has been insuring the car for several years with the same company, you can accumulate bonuses up to the maximum possible. That savings on insurance renewal is automatic.

And, as we have pointed out, there are bonuses with attractive discounts and get to pay less for Car Insurance.

Customize insurance

For companies, the bonus system allows policies to be customized based on the accident history of each driver.

In this way, the insurer adjusts the policy prices in each case based on risk: Those who have fewer accidents pay less, and those who have more pay more.

Loyalty to the best customers

Another fundamental reason for insurers to offer these discounts to customers with fewer claims is to retain the best policyholders of the company: those who have no shares.

Some insurers seek to attract good drivers by maintaining or increasing the bonuses applied by competing insurers.

Any insurance company is interested in having clients with no parties in their portfolio. They are the most profitable policyholders, and rewarding their caution with the car with discounts is a way to avoid losing them. As you can see, everyone wins with this bonus system.

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By Michael Caine

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