No claim bonus can reduce your car insurance premiums. Here is the definition of NCB along with its benefits, how insurance companies calculate NCB, some important points to note about NCB, steps to transfer the NCB, and how to preserve it as well.
Car owners usually take a lot of care about their cars. Right from maintaining the service schedule to keeping it clean on a regular basis. Car owners who are careful even while driving their cars are less likely to get into accidents or incidents unless it is someone else’s mistake. For such car owners, insurance providers offer NCB. Here is everything that you need to know about no claim bonus in car insurance.
Car insurance is mandated as per the Motor Vehicles Act. Though it is mandatory to get a policy, the benefits on offer are much more than merely avoiding a traffic penalty. During an accident, your car might be subject to damage. In such cases, the policy can come to your rescue to help repair the damages.
On the other hand, insurance providers also reward car owners who do not file any claims. This is called no claim bonus.
What is no claim bonus?
For the very first year that you do not claim the policy, your insurance provider will offer a 20% discount. You can use this discount during policy renewal to bring down the premium of the policy. And the best part about NCB is that you can accumulate it over a few years. To be precise up to a maximum of 5 years, or 50% discounts. However, you must complete 5 consecutive years of no claims to avail of the 50% discount.
What are the benefits of NCB?
No claim bonus in car insurance policies offers a bunch of benefits. Here are some of them.
- NCB is linked to the owner, not the car:
Since the insurance providers reward the owner of the car, the NCB discount is not linked to the car but rather to the owner. In other words, if you are planning to sell your car, you need not worry about the NCB that you have accumulated. You can transfer it to the new policy.
- It’s a reward provided by insurers for not filing claims in one full policy year:
Insurance providers offer NCB only when you do not proceed with any claims. Simply put, insurance providers reward car owners for being safe drivers on the road. And if you continue with safe driving, the discounts just keep accumulating.
- NCB Discounts help to lower your premiums at the time of renewal:
NCB discounts allow you to enjoy lower car insurance premiums. The discounts range from 20% to 50% on the own damage component of the policy. This can result in considerable savings when you renew the policy.
- You can transfer NCB from your old car to your new one:
Since NCB is not linked to the car, you can transfer it while selling your old car. You simply need to ask your insurance provider for an NCB certificate and use the same while buying a new car insurance policy.
How do insurance companies calculate NCB?
All insurance providers follow a standard slab to offer NCB discounts. You can start accumulating the discount at the end of the very first year of buying a policy. Here is the slab that all insurance providers follow.
| The number of claim-free years | NCB discount |
| First claim-free year | 20% |
| Two claim-free years | 25% |
| Three claim-free years | 35% |
| Four claim-free years | 45% |
| Five claim-free years | 50% |
Since it is cumulative in nature, it can result in significant savings while renewing the car insurance policy. For example, if you are planning to renew car insurance, where the own damage component is Rs. 10,000, a five-year cumulative discount of 50% will bring that amount down to just Rs. 5,000.
Important things about your No Claim Bonus:
As a car owner, there are a few things about NCB that you must be aware of.
- Avoid smaller claims:
A car can receive a lot of smaller damages, such as scratches and dents. And it might be in your best interest not to file a claim for all smaller repairs. A simple way of deciding whether you should proceed with a claim or not is by comparing the NCB discount with repair costs.
If the cost of repair is Rs. 2,500, but your NCB discount is Rs. 5,000, it might be sensible to just pay for the repair out of your pockets to retain the NCB.
- Not applicable to third-party policies:
NCB discount does not apply to third-party liability policies. It is only applicable to the own damage component of a car insurance policy. And the own damage component is available in a comprehensive plan or standalone own damage plan.
- NCB is available with all insurance:
If you have accumulated an NCB discount with one insurer and choose the switch to another insurance provider at the end of the term, you can still carry forward the discount. Since it is linked to the policyholder and not the car or insurance provider, this is possible.
Can insurance providers terminate NCB?
There are a few conditions where insurance providers can terminate an NCB discount for a policyholder. Here are the two prominent conditions when it can be terminated.
- If you file for a claim while your policy is active, you stand to lose the NCB discount and its benefits. However, should you opt for NCB protection cover as an add-on to your policy, you can retain the NCB discounts even after making a claim.
- The other condition where the NCB discount can be terminated is if the policyholder fails to renew the policy on time. Insurance providers usually offer a grace period to renew a car insurance policy. If the policy is not renewed within the period, it is highly likely that you will lose your NCB discount.
How can I protect the NCB discount?
There are a couple of ways in which you can protect the NCB discount on your car insurance policy.
- You can opt for an NCB protection cover as an add-on to your car insurance policy. Depending on the insurance provider, you will be allowed one or two claims during the year without losing the NCB discount.
- Alternatively, you can protect the NCB by not filing claims for even small repairs or accidents. If the cost of repair is smaller than the discount amount, it might be sensible to forgo the claim and pay from your pockets.
Transferring NCB
When you do decide to sell your existing car, you can claim an NCB certificate that you can use in future car insurance policies to bring down the premiums. To transfer your NCB, here are the steps.
- You must inform your insurance provider about the transfer of NCB from your old car.
- The insurance provider will then carry out their internal processes and provide you with an NCB certificate.
- When you buy insurance for your new car, you can apply for the NCB certificate and avail of the discounts.
Conclusion
No claim bonus in car insurance policy is only applicable to own damage components and not third-party liability policies. The reward to car owners can bring down the cost of buying a policy or renewing a policy by a considerable margin. Above is everything that you need to know about NCB.
Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.