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No Claim Bonus - Everything You Need to Know!

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Published on February 03, 2021. EST READ TIME: 3 minutes

Safe driving habits can not only save your life, but also help you save on car insurance cost. In fact, motor insurance providers reward good driving behaviour with No Claim Bonus. It is a kind of discount that you can enjoy on the own damage component of your comprehensive car insurance policy for every year you don’t make a claim. The discount can usually range from 20% to 50%. So, read on to know more about NCB or No Claim Bonus, how it works, whether it can be transferred, and more.

• Understanding the concept of No Claim Bonus Protection

The No Claim Bonus is offered as a percentage discount on the premium cost for the own damage cover in the car’s insurance policy. After completing one full year in which you did not make any claim, you will get a certain discount upon policy renewal which will get stacked in the following years. Even if you change your insurance company, you can bring along the NCB to the new insurance company.

• Renewal based discount structure

Do note that NCB is a policy renewal-based discount. After you have completed your first claim free year, you will get 20% NCB. If your second year goes without any claim, the discount will go up to 25%. Another 10% is added upon the third claim free year, making it 35% discount. This goes up to 45% upon the fourth annual renewal and reaches the final 50% mark when the fifth claim free year is completed. The condition is that all renewals must be done on time.

• NCB is attached to the policyholder

Many people think that the No Claim Bonus is attached to the vehicle since it is a part of the insurance. But it is quite the opposite. The bonus is attached to the policyholder and not to the vehicle or its policy. This means that if the vehicle needs to be transferred in the name of another owner because of sale, the NCB will not be transferred to the new owner. However, NCB is carried forward if the owner dies and vehicle is transferred to the legal heir of the deceased.

• Transfer of the No Claim Bonus

As mentioned earlier, No Claim Bonus is attached to the vehicle owner and not to the vehicle itself. This means that if you have collected a 50% NCB and you buy a new vehicle, you can move this NCB to the new vehicle. This is generally done when you are upgrading your car by selling or exchanging your old one. The policy of your old car will be terminated and the NCB you have accumulated on it will be brought forward to your new car.

• No Claim Bonus proof

If you want to transfer your No Claim Bonus to a new vehicle and change your car insurance provider at the same time, you are absolutely allowed to do so. In such a scenario, your previous company will provide a certificate of you having accumulated the said NCB, which you will need to share with the new insurance company and they will apply the discount on your new policy premium on their own, without any further intervention from your part.

• Third party cover and your NCB

It is important to realise that third-party insurance is not related to or impacted by your No Claim Bonus. NCB is provided on the own damage cover component of your car insurance policy. On the other hand, third party car insurance policy is a legal mandate and is priced and regulated by the government and the Insurance Regulatory and Development Authority of India. Thus, if you are only buying third party cover for your car, you will not be eligible for any NCB.

• Termination of the NCB

Like all other good things in life, NCB also has its defined end. Your NCB will be terminated under one of the following set of circumstances:

• If you fail to renew your policy for more than 90 days of its expiry

• If you take only third-party insurance and do not get own damage cover within 90 days of expiry of previous policy

• If you make a claim in any given year

• If you sell your vehicle and do not get the NCB transferred to a new vehicle

• If your policy is terminated with compensation because of total loss or vehicle theft

• Add-on cover for NCB protection

Insurance companies realise that in case of very expensive cars, when you have collected a lot of NCB, you may want to make sure that your NCB remains in force even if you make a claim. This is where the NCB protection add-on comes to your rescue. By paying a small fee along with your policy premium, you can get NCB protection, which will ensure that your No Claim Bonus gets carried forward under agreed circumstances even if a claim is made. All in all, if you wish to save on car insurance premium, do take No Claim Bonus seriously. Remember that it is a huge incentive for you to drive safely as well.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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