People sometimes avoid buying a car insurance policy. This is simply because it is a common notion that buying car insurance is a costly affair. This is absolutely true if you are a careless or a rash driver who gets into accidents frequently causing damage repeatedly. So, what about people who drive responsibly? Do they have to bear a high cost for buying car insurance as well? No, those who provide insurance are humble enough to reward those who are safe drivers and drive responsibly. Let’s understand No Claim Bonus in detail.
What Is No Claim Bonus?
As the name suggests, a No Claim Bonus is a reward offered to a policyholder for not raising a claim against their car insurance policy. No Claim Bonus (NCB) is a discount on car insurance premium. To avail this discount, one needs to renew their car insurance in time and avoid making a claim.
How Is No Claim Bonus Calculated?
A No Claim Bonus for car insurance is cumulative in nature i.e. it increases with every claim-free consecutive policy year. However, your premium amount will not drop down to zero one day. No Claim Bonus is capped at 50%. Which means if no claim is raised against a car insurance policy for 5 years straight, the policyholder will get a discount of 50% on their car insurance premium. This will continue until a claim is filed.
Here is how the NCB is calculated:
The percentage of your No Claim Bonus will increase with every claim-free year. As in the table given below, on the first car insurance renewal, you will get a 20% discount on car insurance. On the second consecutive renewal, the discount will increase by 5% i.e. now the total NCB will be 25% on car insurance premium.
No. Of Claim-free Years
|One claim-free year|
|Two consecutive claim-free years|
|Three consecutive claim-free years|
|Four consecutive claim-free years|
|Five consecutive claim-free years|
When Is No Claim bonus Applicable?
No Claim Bonus is applicable only on the “own damage component” of your car insurance. Own damage, as the name suggests is the damage done to the insured car. Another component of car insurance is the Third-party liability cover, buying at least this component is mandatory as per Indian law. However, it is only beneficial when a major accident is caused by the insured car in which third party property is damaged or a person is injured.
Coming back to NCB protection cover, as mentioned it is applicable only on the own damage component of the insurance policy. Financial protection against damage to the insured car is offered by a Comprehensive car insurance policy. Thus, NCB is applicable only on a comprehensive policy and not on a Third-party Liability policy.
How to Retain No Claim Bonus after Making a Claim?
In certain cases, even safe drivers might get involved into an accident. Events like theft or natural calamities could also occur which can damage the insured car. In such cases, it is necessary to raise a car insurance claim. Raising a claim resets the NCB cycle and the discount could drop straight to zero percent. To avoid this, an Add-on called NCB Protect is available for purchase.
If you buy this extra coverage on your policy, you will be allowed to raise a maximum of 2 claims per policy year. However, the number of claims allowed depends on the insurance company. Don’t forget to check the number of claims allowed on the NCB Protect Add-on before purchasing it.
Can NCB Be Transferred If I Buy a New Car or Change My Insurer?
No Claim Bonus is a reward offered to the policyholder for not raising a claim. This bonus is given as per the guidelines of the Insurance Regulatory and Development Authority of India (IRDAI). Thus, even if you decide to buy car insurance from another insurance company or buy another car, you can claim the NCB accumulated in your name. You will need NCB Transfer certificate from the insurance company to be able to continue the benefit.
Just remember that there should not be a gap of more than 90 days between the expiry date of your insurance policy and renewal.
The Bottom Line
It is the moral responsibility of a driver to drive a car safely. Those who take their safety seriously, do not have to keep paying a big amount for buying car insurance every time. Thus, NCB can be availed by driving safely and renewing the car insurance policy in time.
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