Team AckoNov 15, 2021
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.
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.
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.
Here are the major benefits associated with NCB.
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.
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.
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.
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.
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.
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.
Below table will show you the NCB slab on the number of claim-free years:
|Claim-free renewals (years)||Discount on Premium|
|On first claim-free renewal||20%|
|On second claim-free renewal||25%|
|On third claim-free renewal||35%|
|On fourth claim-free renewal||45%|
|On fifth claim-free renewal||50%|
Vehicles over and above 5 years of age will retain a 50% discount on the premium if the owner does not claim.
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.
|Calculation||Mr A||Mr B|
|Premium for the first year||Rs. 22,000||Rs. 22,000|
|Premium for the second year(first claim-free renewal)||Rs. 20,000||Rs. 20,000|
|Premium After NCB calculation||Rs. 16,000 (NCB 20%)||Rs. 20,000 (NCB 0%)|
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.
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.
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.
The cost of NCB Protection cover will be in the range 5-10% of your policy premium.
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.
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.
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.
Booking receipt in the case of purchasing a new car.
NCB certificate from the insurer.
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 car insurance add-on, you can raise two claims in a policy year without losing the accumulated NCB.
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.
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.
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.
Also, read: Car Insurance Glossary
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.
How to check the applicable NCB when it comes to car insurance?
You can check the applicable NCB by referring to the NCB slabs. During the online car insurance renewal process, the applicable NCB will be mentioned on the webpage. The NCB calculation will also be mentioned in your policy document post-policy purchase. In case of offline renewal, ensure to ask the agent or the executive about the applicable NCB before policy renewal.
How much is the maximum No Claim Bonus for car insurance in India?
The maximum No Claim Bonus for car insurance in India is 50% provided no claims have been raised for a consecutive period of five years.
I have two cars. Will one No Claim Bonus Protection Cover Add-on be applicable for both cars?
No, the Add-on will be for one specific policy. You will have to buy another one for the second car.
Is NCB not applicable to Third-party insurance?
NCB is not applicable for liability-only Third-party policies. It is related to ‘Own Damage’, which is a component in case of a Comprehensive vehicle insurance policy.
Can an insurance company offer the NCB retention letter without a change in the ownership of the car?
The NCB retention letter/NCB Transfer Certificate can prove beneficial in the case you are switching insurers and wish to benefit from your accumulated NCB. In this case, the insurance company can offer the NCB retention letter without a change in car ownership.
What happens to my accumulated NCB if I raise a claim for a small incident such as repairing a paint scratch?
If you raise a claim and you do not have the NCB protection Add-on, your accumulated NCB will become zero. It does not matter if the claim is for a minor issue or a major one. A claim is a claim and it will affect the NCB calculation.
Is it possible to cash-out the No Claim Bonus if I do not want to continue with non-mandatory car insurance?
First, NCB is a discount which activates on policy renewal. Second, it is applicable in the case of a Comprehensive policy, which is non-mandatory. Third, there is no option to cash-out NCB. Therefore, the answer to the question is – No.
Is there a specific time limit concerning transferring No Claim Bonus to a legal heir?
Please reach out to your insurance company as the answer might depend upon specific legalities.
How does the insurance company calculate No Claim Bonus for car insurance?
The insurance company calculates No Claim Bonus for car insurance based on the NCB slab and the claims raised by the policyholder during the previous policy period.
Can I transfer my accumulated NCB if I sell my current car and buy a new one or if I choose to switch the insurance company?
Yes, NCB transfer is possible in such a scenario subject to the terms and conditions.
What happens to NCB in the case of a total loss arising due to major car accident or car theft?
NCB applies when there is no claim and upon policy renewal. These conditions are not met in the case of a total loss. Therefore, NCB will not be applicable.
Is the concept of NCB applicable in the case of a Named Driver?
NCB is applicable to the car owner/policyholder not to a Named Driver.
How to claim NCB?
NCB cannot be claimed. It will be calculated automatically if you meet the required terms and conditions.
Is it possible to protect the accumulated NCB?
Yes, it is possible to protect the accumulated NCB – you can opt for the NCB protection Add-on while renewing your policy.
Can one No Claim Bonus be applicable for two cars?
No, No Claim Bonus computation is specific to one car.
How can I get the NCB Transfer certificate?
You will have to reach out to your insurance company and request for the NCB transfer certificate. Different insurance companies might have different processes for the same.
Is it possible to transfer NCB from old car to new bike?
No, such kind of NCB transfer is not permitted.
Will a Third-party claim affect my NCB component?
The NCB component pertains to Own Damage and a third-party claim will not affect it.
Is NCB transfer possible in case I sell my old Sports Utility Vehicle (SUV) and purchase a new sedan?
Yes, NCB transfer will be possible in such a scenario subject to the terms and conditions.
Do I need to opt for the No Claim Bonus component while buying a Comprehensive car insurance policy?
There is no need to opt for a No Claim Bonus component, it is calculated automatically. It is a built-in feature offered by the Comprehensive policy.
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