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

There is a buzz associated with NCB. It sounds cheerful. Why? There are lots of reasons. First, begin by understanding NCB.

NCB is the abbreviation for No Claim Bonus. Yes, you read that right. Bonus. This word has the power to single-handedly brighten your mood, doesn’t it? However, this bonus is not available to everyone, you need to meet some conditions to be eligible for it.

Read ahead to know why NCB is so important while renewing your car insurance policy. Note that NCB is associated with a Comprehensive vehicle plan and not with a standalone Third-party Liability plan.

What is No Claim Bonus in General Insurance?

The insurance industry has two significant aspects – Life Insurance and General Insurance. For a basic understanding, things that do not fall under the Life Insurance bucket can be classified under General Insurance. Therefore, Vehicle Insurance, Travel Insurance, Health Insurance, etc. are a part of the General Insurance segment. NCB’s full form is No Claim Bonus and applies to both segments.

NCB plays a crucial role in vehicle insurance (known as bike and car insurance No Claim Bonus) as well as health insurance, as these are long term policies. Travel insurance is usually trip-related and those who buy annual policies belong to a niche category, therefore NCB is not popular over there. On the other hand, people opting for vehicle insurance and health insurance are on the higher side and NCB helps them to save money as it leads to a sizeable discount on their policy’s premium during renewal.

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

You drive safely for a year and make no claims during the policy period. Your policy period is about to end and it is time for 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 bike and car insurance No Claim Bonus.

Benefits of NCB in Car Insurance:

Here are the major benefits associated with NCB.

1) Discount:

NCB will help you to fetch a discount on policy renewal. This means you will have to pay less premium compared to what you would have paid if you had raised a claim during the policy period.

2) High Savings:

NCB is incremental if you follow the rules. Therefore, you can get a sizeable discount on policy renewal for years if you do not raise a claim consecutively for five years and renew your policy in time.

3) Transferable:

NCB is associated with the car owner and not the car. Therefore, you can carry forward the NCB if you plan to sell your old (insured) car and buy a new one. NCB also stays with you if you choose to port your policy from one insurer to another.

How Does NCB Work?

NCB works just like every other bonus is intended to work. First, it is a reward and second, a motivation to keep repeating the good performance. Thus, by providing the NCB in car insurance, insurers encourage you to drive safe and discourage you to raise claims. This way, a car insurance policyholder will think twice before raising claims for trivial issues.

Why is NCB So Important in Car Insurance?

NCB is important in car insurance because car owners spend a considerable amount on Comprehensive car insurance during the lifetime of the vehicle. The more the value of the car, the higher the premium. Since NCB helps to reduce the premium, it becomes an important feature for the car owner.

No Claim Bonus Calculator:

If you are wondering how NCB in Car insurance is calculated, the following paragraphs will give you the answer.

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, considering you do not claim during that period.

Also, Check: Car Insurance Premium Calculator

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.

NCB Slab:

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.

NCB Discount on Your Premium Calculation:

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 NCB Protection cover’s premium to avail its benefits.

When Is No Claim Bonus Applicable?

No Claim Bonus is applicable at the time of policy renewal and only on the ‘Own Damage’ 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 liability 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.

NCB Protection Cover as Car Insurance Add-on:

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 – which is the protected No Claim Bonus – active even if you claim during the policy period. Note that the number of claims one can make are according to the terms and conditions. Usually, two claims are allowed in a policy year with this Add-on.

How Much Does A No Claim Bonus Protection Add-On Cost?

The cost of NCB Protection cover will be in the range 5-10% of your policy premium.

Who Should Opt for A No Claim Bonus Protection Cover?

The NCB protection cover can be beneficial for:

• Anyone who owns a car and a comprehensive car insurance policy.
• Anyone whose car is vulnerable to damage and therefore is likely to raise a claim. For example, damage due to flooding.
• Anyone who has a car for more than 2 years and doesn’t want to lose the NCB.

How to transfer NCB to New Car Insurance?

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). 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.

Documents Required to Transfer NCB:

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.

• Application for NCB transfer.
• Copy of the car’s insurance policy.
• Sales agreement.
• Booking receipt in the case of purchasing a new car.
• NCB certificate from the insurer.

How to Retain No Claim Bonus After Making A Claim:

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

What do IDV and NCB mean in insurance?

IDV and NCB are two terms that are closely associated with car insurance premium calculation. IDV = Insured Declared Value. It is the value of the car taken into consideration for premium calculation. As NCB is a discount that comes into action after a no-claim policy period, it affects the premium calculation during policy renewal.

Things to remember about NCB in India:

Listed below are important pointers related to NCB in India.

• When is NCB Terminated? – Either on non-renewal of policy (within 90 days of policy expiration) or if a claim is made without the NCB protection Add-on.
• NCB and Claim – If you raise a claim without the NCB protection Add-on, then the NCB resets to zero.
• NCB for Commercial Vehicles – Please refer to the policy document for details as the terms and conditions for NCB in the case of commercial vehicles might vary from one insurer to another.
• NCB Proof – The NCB certificate obtained from the insurer can be the NCB proof.

Why Should We Opt for No Claim Bonus Protection Cover?

An NCB Protect cover gives you extra cushioning. It keeps the bonus component intact even if some claims (depending upon the terms and conditions) are raised during the policy period. You can opt for NCB protection cover to benefit from the renewal discount irrespective of a claim (or claims) during the policy period.

Frequently Asked Questions:

NCB is a slightly complex concept. Therefore, it is natural to have some queries around it. Here are some common queries and their answers. If you have some specific questions, you can reach out to your insurance company’s support team and clear your doubts. Note that the answers below are generic and might vary based on specific details, legal implications, and other scenarios.

Related Articles:

• Accessories Cover for Car Insurance
• Reasons for Car Insurance Claim Rejections
• Things to Consider before Selecting Long-term Comprehensive Car Insurance Policy
• Downtime Allowance Car Insurance Add-on

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