What is No Claim Bonus (NCB) in Car Insurance and How is NCB Calculated?

NCB (No Claim Bonus) in comprehensive car insurance is a discount earned for each claim-free policy year on the own-damage component. This reduces your premium, typically by 20% for the first year to 50% for five consecutive years, rewarding safe driving. Even if you raise a minor claim, the NCB bonus will become zero, and you won’t be eligible for discounts. Read ahead to know why NCB is so important while renewing your car insurance policy. Note that NCB is associated with a Comprehensive policy and not with a standalone Third-party Liability plan.

Let’s understand NCB with an example wherein you have driven safely for a year and made no claims during the policy period. Your policy period is about to end, and it is time for car insurance renewal. Your insurer acknowledges the fact that you are a safe driver and wants to reward you for not raising a claim. Thus, the insurer offers you a discount while renewing your policy. This reward is termed as a No Claim Bonus.

NCB or No Claim Bonus becomes effective when you raise no claims in a given year. The discount starts from 20% and goes up to 50%. This discount is applicable when you renew your vehicle insurance policy. This means that the 20% discount is applicable during the first renewal and for five consecutive claim-free years, you can earna  50% discount. Thus, by providing the NCB in car insurance, insurers encourage you to drive safely and discourage you from raising claims for minor claims. This way, a car insurance policyholder will think twice before raising claims.

Below table will show you the NCB slab on the number of claim-free years:

Vehicles over and above 5 years of age will retain a 50% discount on the premium if the owner does not claim in a given policy year.

The No Claim Bonus gets lost in the following event:

If you go for a Comprehensive Car Insurance policy, you can choose appropriate add-ons for wider coverage. The NCB Protection Cover (Add-on) is designed to keep your NCB component active even if you claim during the policy period. Note that the number of claims one can make is according to the terms and conditions of the insurer.

No Claim Bonus can be transferred to a new vehicle or insurer at the time of policy renewal. The bonus is given as per the guidelines of the Insurance Regulatory and Development Authority of India (IRDAI). Even if you decide to buy car insurance from another insurance company or buy another car (after selling the current one), you can claim the NCB accumulated in your name.
 

You will need a No Claim Bonus 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. NCB transfer rules suggest that the benefit cannot be transferred to a new owner of the vehicle in case of a sale, as the NCB is associated with the car owner and not the car.
 

You need to follow these steps to transfer the NCB to your new insured:

Here’s a list of documents that are needed during the NCB transfer. Note that different insurance companies might ask for a different combination of the following documents.

No Claim Bonus has a lot of benefits, such as those listed below:

If you do not raise claims for five consecutive years, you gain a 50% discount on insurance premium. However, the percentage will reset to zero once you raise a claim. In simple words, as a policyholder, you get a discount on the payable premium for the subsequent year of the policy, provided you do not claim during that period. For instance, if you do not lodge a claim in the first year of your policy, you will get a 20% discount on the premium of second-year policy. It’s an assured way to save money on the car insurance policy premiums. You earn discounts for every claim-free year.

Here’s an example: Mr A and Mr B bought expensive vehicles of the same make and model. Both paid Rs. 22,000 to insure their vehicle for the first year. For the second year, the premium would reduce to Rs. 20,000 due to a reduction in the value of the vehicle.

Mr A did not raise a claim during the policy period (first year) but unfortunately, Mr B was involved in a car accident and had to raise a claim for damages. Therefore, Mr A received a 20% discount on the premium payable for the second year (first claim-free renewal) but Mr B did not receive the discount as his NCB was zero.

Note: The above example is just for explanatory purposes. NCB is calculated on the Own Damage component of the payable premium and not the overall premium.

Here’s an interesting option. If you opt for an NCB Protection Add-on, you can raise a claim and still qualify for the renewal discount. You will have to pay the No Claim Bonus Protection cover’s premium to avail of its benefits.

No Claim Bonus is applicable at the time of policy renewal and only on the ‘Own Damage Cover’ component of your car insurance policy. Own Damage, as the name suggests, is the damage done to the insured car. Another component of car insurance is the Third-party Car Insurance cover, buying at least this component is mandatory as per Indian law. It is beneficial when a major accident is caused by the insured car in which third party property is damaged or a person is injured.
 

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.

In case of accidents, NCB will be lost. But, if it is found that the driver is not at all responsible for the accident, then the expenses will be split between the insurer and the policyholder. Similary, in case the vehicle is stolen, then also the NCB will be zero.

The NCB protection cover can be beneficial for:

If you want to retain your No Claim Bonus even after making a claim, you need to buy the No Claim Bonus Protection Add-on along with the Comprehensive policy. Usually, with that car insurance add-on, you can raise two claims in a policy year without losing the accumulated NCB
 

Listed below are important pointers related to NCB in India.

Listed below are some of the common myths associated with NCB:

Myth 1: The NCB gets lost if you switch your insurer. On the other hand, NCB can be easily transferred from one insurer to another.

Myth 2: If you replace an old car with a new one, then the NCB is lost. However, the NCB will remain intact, provided the new car belongs to that of old one.

Myth 3: Many people mistakenly believe that NCB protection is for vehicles, but that's not the case. NCB lowers your policy premium and stays with you as long as you renew your policy.