It is a moral requirement for every vehicle owner to drive safely as this reduces the chances of accidents and loss. Sometimes though, things like human error, breaking the law, or miscalculation while driving may result in unfortunate events. Insurance takes care of financial losses and the driver should be responsible for on-road risks. When no unfortunate events occur, the policyholder is rewarded with NCB. NCB is No Claim Bonus. This article helps you with all you need to know about using NCB of old car insurance to reduce the premium on a new car.
What is NCB (No Claim Bonus)?
No Claim Bonus is one of the biggest discounts offered on car insurance when no claims are raised during 5 consecutive policy years. The discount can reach up to 50% of the premium amount. No other factor can give you such a large discount or reward you for good behaviour as compared to this bonus.
How to Use NCB of Old Car Insurance to Reduce New Car Policy Premium?
NCB is awarded to the policyholder and not on the insurance plan. The car insurance policy is used only as a reference for calculating the NCB of the current year. This is why a policyholder can continue to get the benefit even if he/she is no longer associated with the insurance company. Here is how you can use the NCB of your old car to reduce the premium of your insurance policy of a new car:
Earn NCB on an Old Car:
The best possible way to earn an NCB on your old car is to drive safely, follow the rules, and avoid raising claims. Not raising a claim does not mean that you have to bear the cost of repairs when they are a heavy financial burden for you. You just have to avoid raising a claim for minor repairs or replacement that you can easily bear. This helps you keep the NCB intact.
Retain the NCB when buying a new car:
Now you know that NCB increases with each consecutive year for 5 claim-free years. The maximum discount you can earn on your car insurance policy is 50%. From the 6th year onwards you will continue to receive a 50% discount until you raise a claim or fail to renew the policy for more than 90 days. When you have an accumulated discount and wish to buy a new car, you can get the NCB transferred from your older car insurance policy to the current one. This implies you can continue to receive a 50% discount on premium even when you buy a new car and a fresh policy.
When you wish to retain the NCB from your old car insurance to the new one, you need to acquire the NCB certificate. This is a document that supports your claim for getting the NCB transferred to the new insurance policy. There could be two scenarios in this case:
- When you buy a new policy from the current insurance company: Since you are buying a fresh policy from your current insurer, you can request a copy of the NCB certificate for your reference.
- When you buy a new policy from a new insurance company: You need to request your old insurance company to issue the NCB transfer letter and the NCB certificate to avail a discount on your new car insurance policy from a different insurance company.
Also, read: Certificate of Insurance in Motor Vehicles Act
Use the NCB:
The NCB you earned can be used to avail a good discount on your current car insurance policy with the help of NCB certificate. If you are buying car insurance from a digital insurance company like ACKO, you can get in touch via the customer care number and tell them about the NCB certificate to get a discounted quote.
How is NCB calculated?
NCB increases with each claim-free year till you reach 5 years of not raising a claim. After 5 years the discount is capped at 50%. This means that the NCB cannot be more than 50%. Here is a table that will help you understand what happens to your NCB and how it increases each year during the first 5 claim-free years:
|The Status of NCB||Discount on Own Damage Component|
|No claims made during 1 policy period||20%|
|No claims raised in 2 consecutive policy periods||25%|
|No claims raised in 3 consecutive policy periods||35%|
|No claims raised in 4 consecutive policy periods||45%|
|No claims raised in 5 consecutive policy periods||50%|
|Claim-free 6th year onwards for every consecutive year||50%|
What is the Use of NCB Protect Add-on?
NCB is probably the most important discount one can receive in car insurance. And there are a few factors that can make a policyholder lose all the hard-earned NCB. One should be wary of these factors and try to retain the NCB as much as possible. But a person may have to raise a claim in an unfortunate event. Providing a financial cover is the basic purpose of insurance. This is where the NCB Protect comes into the picture. It prevents the NCB from resetting in the event of a claim.
An insurance company may cap the number of claims allowed under the NCB protect add-on. Mostly 2 claims per policy period are allowed by insurance companies. You need to get in touch with your insurer to know the exact details of the NCB Protect Add-on offered by them. People with a dense claim history should consider opting for this add-on.
Frequently Asked Questions
The following questions are the most commonly asked ones regarding NCB and claims. If you need more details about how NCB works, you can visit www.acko.com. The section will help you gain more knowledge about car insurance and related concepts.
Yes, it is possible to get the NCB transferred to a new car because this discount is awarded to the policyholder and not on the insurance policy. One can get a 50% discount if no claims are raised for a long period of time.
Yes, one should buy separate car insurance policies for each car that he/she owns. As per the recent rules, this person does not have to buy a separate Personal Accident (PA) Covers. One add-on in any of the policy should suffice. However, if the cars are driven by multiple people then the PA cover should also be separately purchased.
Yes, it is highly beneficial to try and keep the NCB intact as it can give a whopping 50% discount on the own damage component of your car insurance policy.
No, NCB does not get transferred to the new owner in case of resale. It can be retained by the old owner and get it transferred to the new policy if applicable. The new owner’s NCB cycle will begin from zero while buying the policy and then increase depending upon the number of consecutive claim-free years.
No NCB is not valid across all types of vehicles. The NCB accumulated on a car insurance policy can only be retained on another car insurance policy by the same policyholder. The owner of a two-wheeler cannot continue to get the NCB from the policy if he/she purchases a car.
Accumulated NCB can be retained with the help of NCB transfer letter or the NCB certificate. You need to share this document with the insurance company to avail the NCB discount.
Yes, the NCB can drop to zero in two situations. One is when a claim is raised without the NCB Protect Add-on and another is when the car insurance policy is not renewed in time. One should avoid this by not raising claims for minor damages and renewing the car insurance policy within 90 days of expiry.
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