Will a Minor Accident Steal Your No-Claim Bonus?

Think car insurance only protects your vehicle? Well, it does more than that. Car insurance also rewards safe, responsible drivers through the NCB or No Claim Bonus feature. If you do not file any claims during a policy year, you are eligible for a discount on your premium during renewal. For instance, after two claim-free years, you could receive a 20% discount. 

However, even a minor claim can reduce or void your NCB. So, before filing for small damages, it is worth considering the impact on your bonus. Read on to understand how the NCB works, does a minor accident voids the no claim bonus, and how to make the most of this valuable benefit.

A No Claim Bonus (NCB) is a discount on your insurance premium that providers offer if you have not made any claims during the preceding policy year. It is a reward for safe driving and maintaining your vehicle well.

For example, if your annual car insurance premium for the "own damage insurance" portion is ₹10,000 and you complete one year without making any claims, you could receive a 20% NCB. This means your renewal premium for that portion would be reduced to ₹8,000. 

This discount can increase with each consecutive claim-free year, typically reaching a maximum of 50% after 5 claim-free years. If you make a claim, your accumulated NCB usually resets to zero, unless you have an NCB protection add-on. So, you can either accumulate NCB yearly by not making a claim, or you can purchase an NCB add-on cover by increasing 5 to 10% of your premium.

Let us understand how No Claim Bonus (NCB) gets calculated with the help of an example: 

Both Mr. X and Mr. Y have purchased expensive cars of the same model and make. They paid approximately ₹20,000 to insure their cars in the first year. In the second year, the premium of the cars would be ₹18,000 since the vehicle value would decrease with time.

For these two years, Mr. X did not make a claim. Whereas Mr. Y faced an accident in the second year and made a claim. As a consequence, Mr. X receives a 20% discount on the 2nd year policy premium, but Mr. Y did not receive any discount since his NCB was zero.

The following are a few benefits of a no claim bonus add-on to know:

Deductibles and NCB are two vital factors to take into consideration while you are planning to make a claim. 

Deductibles refer to the portion of the claim that a policyholder is supposed to pay. NCB is the discount a policyholder receives for not claiming in a whole policy year. The following are certain conditions where making a claim is not the best option if you want to save your NCB:

No Claim Bonus (NCB) could be beneficial for anyone owning a comprehensive car insurance policy. Especially for the people who have a vulnerable and damage-prone car.  Since it is a reward-based policy feature, a policyholder has to try to avoid making claims for minor accidents and have a clear understanding of the NCB terms and conditions.